Inflation Targeting and Fiscal Rules: Do Interactions and Sequencing Matter?

37 Pages Posted: 2 Jul 2014

See all articles by Jean-Louis Combes

Jean-Louis Combes

Universite d'Auvergne - Clermont 1 - CERDI

Xavier Debrun

International Monetary Fund (IMF) - Research Department

Alexandru Minea

Université d'Auvergne - Clermont 1

Rene Tapsoba

International Monetary Fund (IMF)

Date Written: May 2014

Abstract

The paper examines the joint impact of inflation targeting (IT) and fiscal rules (FR) on fiscal behavior and inflation in a broad panel of advanced and developing economies over the period 1990-2009. The main contribution of the paper is to show that, as suggested by the theoretical literature, interactions between FR and IT matter a great deal for policy outcomes. Specifically, the combination of FR and IT appears to deliver more disciplined macroeconomic policies than each of these institutions in isolation. In addition, the sequencing of the monetary and fiscal reforms plays a role: adopting FR before IT delivers stronger results than the reverse sequence.

Keywords: Inflation targeting, Fiscal rules, Fiscal policy, Macroprudential Policy, Monetary policy, Economic models, institutional reform sequencing., inflation, inflation rate, terms of trade, independent central bank, inflation target, monetary economics, price stability, inflation dynamics, price level, monetary institutions, fiscal behavior, inflation tax, fiscal authorities, fiscal authority, fiscal balances, lower inflation, average inflation, rate of inflation, inflation rates, inflation aversion, low inflation, inflation data, fiscal performances, inflation forecasts, fiscal reforms, fiscal policy rules, real value, government budget, fiscal balance, fiscal theory, fiscal institutions, excess

JEL Classification: E52, E58, E63, H62

Suggested Citation

Combes, Jean-Louis and Debrun, Xavier and Minea, Alexandru and Tapsoba, Rene, Inflation Targeting and Fiscal Rules: Do Interactions and Sequencing Matter? (May 2014). IMF Working Paper No. 14/89, Available at SSRN: https://ssrn.com/abstract=2461725

Jean-Louis Combes (Contact Author)

Universite d'Auvergne - Clermont 1 - CERDI ( email )

65 Boulevard Francois Mitterrand
63000 Clermont-Ferrand Cedex 1
France
473 177 413 (Phone)

Xavier Debrun

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-8321 (Phone)
202-623-6343 (Fax)

Alexandru Minea

Université d'Auvergne - Clermont 1 ( email )

Clermont-Ferrand
France

Rene Tapsoba

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
91
Abstract Views
521
rank
380,547
PlumX Metrics