Anchoring Fiscal Expectations
Eric M. Leeper
Indiana University at Bloomington - Department of Economics; National Bureau of Economic Research (NBER)
August 16, 2009
CAEPR Working Paper No. 015-2009
In this lecture, I argue that there are remarkable parallels between how monetary and fiscal policies operate on the macro economy and that these parallels are sufficient to lead us to think about transforming fiscal policy and fiscal institutions as many countries have transformed monetary policy and monetary institutions. Making fiscal transparency comparable to monetary transparency requires fiscal authorities to discuss future possible fiscal policies explicitly. Enhanced fiscal transparency can help anchor expectations of fiscal policy and make fiscal actions more predictable and effective. As advanced economies move into a prolonged period of heightened fiscal activity, anchoring fiscal expectations will become an increasingly important aspect of macroeconomic policy.
Number of Pages in PDF File: 46
Keywords: monetary-fiscal policy interactions, sustainability, transparency
JEL Classification: E52, E63, H6
Date posted: August 19, 2009
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