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Erscheinungsjahr: 
2022
Quellenangabe: 
[Journal:] Quantitative Economics [ISSN:] 1759-7331 [Volume:] 13 [Issue:] 2 [Year:] 2022 [Pages:] 593-628
Verlag: 
The Econometric Society, New Haven, CT
Zusammenfassung: 
We estimate a model in which fiscal and monetary policy obey the targeting rules of distinct policy authorities, with potentially different objective functions. We find: (1) Time-consistent policy fits U.S. time series at least as well as instrument-rules-based behavior; (2) American policies often do not conform to the conventional mix of conservative monetary policy and debt-stabilizing fiscal policy, although economic agents expect fiscal policy to stabilize debt eventually; (3) Even after the Volcker disinflation, policies did not achieve that conventional mix, as fiscal policy did not begin to stabilize debt until the mid 1990s; (4) The high inflation of the 1970s could have been effectively mitigated by either a switch to a fiscal targeting rule or an increase in monetary policy conservatism; (5) If fiscal behavior follows its historic norm to eventually stabilize debt, current high debt levels produce only modest inflation; if confidence in those norms erodes, high debt may deliver substantially more inflation.
Schlagwörter: 
Bayesian estimation
monetary and fiscal policy interactions
targeting rules
Markov switching
JEL: 
C11
E31
E63
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