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Book/Printed Material Monetary and fiscal policy switching

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Title

  • Monetary and fiscal policy switching

Summary

  • "A growing body of evidence finds that policy reaction functions vary substantially over different periods in the United States. This paper explores how moving to an environment in which monetary and fiscal regimes evolve according to a Markov process can change the impacts of policy shocks. In one regime monetary policy follows the Taylor principle and taxes rise strongly with debt; in another regime the Taylor principle fails to hold and taxes are exogenous. An example shows that a unique bounded non-Ricardian equilibrium exists in this environment. A computational model illustrates that because agents' decision rules embed the probability that policies will change in the future, monetary and tax shocks always produce wealth effects. When it is possible that fiscal policy will be unresponsive to debt at times, active monetary policy (like a Taylor rule) in one regime is not sufficient to insulate the economy against tax shocks in that regime and it can have the unintended consequence of amplifying and propagating the aggregate demand effects of tax shocks. The paper also considers the implications of policy switching for two empirical issues"--National Bureau of Economic Research web site.

Names

  • Davig, Troy
  • Chung, Hess
  • Leeper, Eric Michael
  • National Bureau of Economic Research

Created / Published

  • Cambridge, MA : National Bureau of Economic Research, c2004.

Headings

  • -  Fiscal policy--Mathematical models
  • -  Monetary policy--Mathematical models

Notes

  • -  Title from PDF file as viewed on 1/18/2005.
  • -  Includes bibliographical references.
  • -  Also available in print.
  • -  Mode of access: World Wide Web.
  • -  System requirements: Adobe Acrobat Reader.

Call Number/Physical Location

  • HB1

Digital Id

Library of Congress Control Number

  • 2005615752

Access Advisory

  • Unrestricted online access

Online Format

  • image
  • pdf

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Cite This Item

Citations are generated automatically from bibliographic data as a convenience, and may not be complete or accurate.

Chicago citation style:

Davig, Troy, Hess Chung, Eric Michael Leeper, and National Bureau Of Economic Research. Monetary and Fiscal Policy Switching. Cambridge, MA: National Bureau of Economic Research, 2004. Pdf. https://aj.sunback.homes/item/2005615752/.

APA citation style:

Davig, T., Chung, H., Leeper, E. M. & National Bureau Of Economic Research. (2004) Monetary and Fiscal Policy Switching. Cambridge, MA: National Bureau of Economic Research. [Pdf] Retrieved from the Library of Congress, https://aj.sunback.homes/item/2005615752/.

MLA citation style:

Davig, Troy, et al. Monetary and Fiscal Policy Switching. Cambridge, MA: National Bureau of Economic Research, 2004. Pdf. Retrieved from the Library of Congress, <aj.sunback.homes/item/2005615752/>.