Anchoring Fiscal Expectations

46 Pages Posted: 19 Aug 2009

See all articles by Eric M. Leeper

Eric M. Leeper

University of Virginia ; Indiana University at Bloomington - Department of Economics; National Bureau of Economic Research (NBER); George Mason University - Mercatus Center

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Date Written: August 16, 2009

Abstract

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.

Keywords: monetary-fiscal policy interactions, sustainability, transparency

JEL Classification: E52, E63, H6

Suggested Citation

Leeper, Eric Michael, Anchoring Fiscal Expectations (August 16, 2009). CAEPR Working Paper No. 015-2009, Available at SSRN: https://ssrn.com/abstract=1456393 or http://dx.doi.org/10.2139/ssrn.1456393

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