English, Article, Journal or magazine article edition: Policy Uncertainty, Symbiosis, and the Optimal Fiscal and Monetary Conservativeness Giovanni Di Bartolomeo; Marco Manzo; Francesco Giuli

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Bookmark: http://trove.nla.gov.au/version/77061
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Policy Uncertainty, Symbiosis, and the Optimal Fiscal and Monetary Conservativeness
Author
  • Giovanni Di Bartolomeo
  • Marco Manzo
  • Francesco Giuli
Physical Description
  • preprint
Notes
  • This paper extends the stabilization game between monetary and fiscal authorities to the case of multiplicative (model) uncertainty. In this context, the “symbiosis assumption”, i.e. fiscal and monetary policy share the same ideal targets, no longer guarantees the achievement of ideal output and inflation, unless the ideal output is equal to its natural level. A time consistency problem arises.
  • RePEc:wpa:wuwpma:0508005
  • This paper extends a well-known macroeconomic stabilization game between monetary and fiscal authorities introduced by Dixit and Lambertini (American Economic Review, 93: 1522-1542) to multiplicative (policy) uncertainty. We find that even if fiscal and monetary authorities share a common output and inflation target (i.e. the symbiosis assumption), the achievement of the common targets is no longer guaranteed; under multiplicative uncertainty, in fact, a time consistency problem arises unless policymakers¢ output target is equal to the natural level.
  • Monetary-fiscal policy interactions, uncertainty, symbiosis.
  • RePEc:crt:wpaper:0802
Language
  • English
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