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Policy Choices Under Monetary and Fiscal Theories of the Price Level

Chadha, Jagjit S. (2011) Policy Choices Under Monetary and Fiscal Theories of the Price Level. Macroeconomics and Finance in Emerging Market Economies, 4 (2). pp. 189-212. ISSN 1752-0843. (doi:10.1080/17520843.2011.557389) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided) (KAR id:11178)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided.
Official URL:
http://dx.doi.org/10.1080/17520843.2011.557389

Abstract

Price-level determination requires co-ordination of monetary and Öscal policy

to ensure a unique rational expectations equilibrium (REE). This paper derives

a number of implications for simple interest rate rules resulting from various

Öscal strategies. We show that Öscal choices under either the monetary theory

of the price-level (MTPL) and the Öscal theory of the price-level (FTPL) can

challenge widely accepted principles of monetary policy. SpeciÖcally, we show

that a Öscal rule that responds aggressively to output and ináation may force the

monetary authorities to adopt signiÖcantly more aggressive output and ináation

stabilization policy than suggested by the Taylor Principle. We also show how

when monetary policy is severely constrained, the Öscal policy maker can act to

stabilise the economy. Some policy conclusions in light of the lower zero bound for

monetary policy and debt stabilization are drawn.

Item Type: Article
DOI/Identification number: 10.1080/17520843.2011.557389
Uncontrolled keywords: Monetary and Fiscal Policy Rules; Ricardian, non-Ricardian fiscal policy
Subjects: H Social Sciences > HB Economic Theory
Divisions: Divisions > Division of Human and Social Sciences > School of Economics
Depositing User: Jagjit Chadha
Date Deposited: 29 Jun 2011 16:56 UTC
Last Modified: 16 Nov 2021 09:49 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/11178 (The current URI for this page, for reference purposes)

University of Kent Author Information

Chadha, Jagjit S..

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