Abstract

http://ssrn.com/abstract=1502870
 
 

References (81)



 
 

Citations (1)



 


 



Anchors Away: How Fiscal Policy Can Undermine 'Good' Monetary Policy


Eric M. Leeper


Indiana University at Bloomington - Department of Economics; National Bureau of Economic Research (NBER); Monash University, Department of Economics

November 8, 2009


Abstract:     
Slow moving demographics are aging populations around the world and pushing many countries into an extended period of heightened fiscal stress. In some countries, taxes alone cannot or likely will not fully fund projected pension and health care expenditures. If economic agents place sufficient probability on the economy hitting its “fiscal limit” at some point in the future - after which further tax revenues are not forthcoming - it may no longer be possible for “good” monetary policy behavior to control inflation or anchor inflation expectations. In the period leading up to the fiscal limit, the more aggressively that monetary policy leans against inflationary winds, the more expected inflation becomes unhinged from the inflation target. Problems confrontingmonetary policy are exacerbated when policy institutions leave fiscal objectives and targets unspecified and, therefore, fiscal expectations unanchored.

Number of Pages in PDF File: 34

working papers series


Download This Paper

Date posted: November 9, 2009  

Suggested Citation

Leeper, Eric M., Anchors Away: How Fiscal Policy Can Undermine 'Good' Monetary Policy (November 8, 2009). Available at SSRN: http://ssrn.com/abstract=1502870 or http://dx.doi.org/10.2139/ssrn.1502870

Contact Information

Eric Michael Leeper (Contact Author)
Indiana University at Bloomington - Department of Economics ( email )
304 Wylie Hall
Bloomington, IN 47405-6620
United States
812-855-9157 (Phone)
812-855-3736 (Fax)

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Monash University, Department of Economics ( email )
Wellington Road
Clayton, Victoria 3168
Australia
Feedback to SSRN


Paper statistics
Abstract Views: 233
Downloads: 34
References:  81
Citations:  1

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.391 seconds