Monetary and Fiscal Policy Interaction with Various Degrees of Commitment

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F14%3A86088377" target="_blank" >RIV/61989100:27510/14:86088377 - isvavai.cz</a>
Result on the web
<a href="http://journal.fsv.cuni.cz/mag/article/show/id/1290" target="_blank" >http://journal.fsv.cuni.cz/mag/article/show/id/1290</a>
DOI - Digital Object Identifier
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Result language
angličtina
Original language name
Monetary and Fiscal Policy Interaction with Various Degrees of Commitment
Original language description
Well before the global financial crisis, the long-term trend in fiscal policy had raised concerns about risks for the outcomes of monetary policy. Are fears of an unpleasant monetarist arithmetic justified? To provide some insight, this paper examines strategic fiscal-monetary interactions in a novel game theory framework with an asynchronous timing of moves. It generalizes the standard commitment concept of Stackelberg leadership by making it dynamic. By letting players move with a certain fixed frequency this framework allows policies to be committed or rigid for different periods of time. We find that the inferior non-Ricardian (active fiscal, passive monetary) regime can occur in equilibrium, and that this is more likely in a monetary union due tofree-riding. The bad news is that, unlike under static commitment of Sargent and Wallace (1981), this may happen even if monetary policy acts as leader for longer periods of time than fiscal policy. The good news is that under some circum
Czech name
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Czech description
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Type
J<sub>x</sub> - Unclassified - Peer-reviewed scientific article (Jimp, Jsc and Jost)
CEP classification
AH - Economics
OECD FORD branch
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Project
Result was created during the realization of more than one project. More information in the Projects tab.
Continuities
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Publication year
2014
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

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