Monetary Policy and Fiscal Rules

37 Pages Posted: 16 Mar 2004

See all articles by Barbara Annicchiarico

Barbara Annicchiarico

University of Rome, Tor Vergata - Department of Economics and Finance; University of Rome Tor Vergata - Centre for International Studies on Economic Growth (CEIS)

Giancarlo Marini

University of Rome Tor Vergata - Faculty of Economics

Alessandro Piergallini

Tor Vergata University

Date Written: March 2004

Abstract

This paper studies the performance of monetary policy under alternative fiscal regimes in a dynamic New Keynesian optimizing general equilibrium model with wealth effects. The interactions between fiscal policy and interest rate rules are shown to have relevant implications for the existence of a unique rational expectations equilibrium. When calibrated to Euro Area quarterly data, the model simulation results show that the preferred monetary-fiscal regime for inflation stabilization consists of a generalized Taylor rule with a low degree of inertia coupled with a public debt-GDP ratio targeting rule.

Keywords: Fiscal Policy Rules, Monetary Policy, Wealth Effects

JEL Classification: E52, E58, E63

Suggested Citation

Annicchiarico, Barbara and Marini, Giancarlo and Piergallini, Alessandro, Monetary Policy and Fiscal Rules (March 2004). CEIS Working Paper No. 50. Available at SSRN: https://ssrn.com/abstract=517883 or http://dx.doi.org/10.2139/ssrn.517883

Barbara Annicchiarico

University of Rome, Tor Vergata - Department of Economics and Finance ( email )

Rome, I-00133
Italy

University of Rome Tor Vergata - Centre for International Studies on Economic Growth (CEIS) ( email )

Via Columbia, 2
Rome, I-00133
Italy

Giancarlo Marini (Contact Author)

University of Rome Tor Vergata - Faculty of Economics ( email )

Via Columbia n.2
Rome, 00100
Italy

Alessandro Piergallini

Tor Vergata University ( email )

Via Columbia 2
Rome, Rome 00133
Italy
+390672595431 (Phone)
+39062020500 (Fax)

HOME PAGE: http://www.economia.uniroma2.it/piergallini

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