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Time Consistency of Fiscal and Monetary Policy: A Solution
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
2005 (English)Report (Other academic)
Abstract [en]

This paper demonstrates how time consistency of the Ramsey policy – the optimal fiscal and monetary policy under commitment – can be achieved. Each government should leave its successor with a unique maturity structure for the nominal and indexed debt, such that the marginal benefit of a surprise inflation exactly balances the marginal cost. Unlike in earlier papers on the topic, the result holds for quite a general Ramsey policy, including timevarying policies with positive inflation and positive nominal interest rates. We compare our resuklts with those in Persson, Persson, and Svensson (1987), Calvo and Obstfeld (1990), and Alvarez, Kehoe, and Neumeyer (2004).

Place, publisher, year, edition, pages
Stockholm: IIES , 2005. , 26 p.
Series
Seminar Paper / Institute for International Economic Studies, Stockholm University. (Online), ISSN 1653-610X ; 734
Keyword [en]
time consistency, Ramsey policy, surprise inflation
National Category
Economics
Identifiers
URN: urn:nbn:se:su:diva-42213OAI: oai:DiVA.org:su-42213DiVA: diva2:344388
Available from: 2010-08-19 Created: 2010-08-19 Last updated: 2010-08-19Bibliographically approved

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CiteExportLink to record
Permanent link

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Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
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  • asciidoc
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