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On optimal monetary and fiscal policy interactions in open economies

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dc.contributor.author Forlati, Chiara
dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
dc.date.accessioned 2017-07-26T10:49:53Z
dc.date.available 2017-07-26T10:49:53Z
dc.date.issued 2004-07-01
dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=949
dc.identifier.uri http://hdl.handle.net/10230/1183
dc.description.abstract This paper studies monetary and fiscal policy interactions in a two country model, where taxes on firms sales are optimally chosen and the monetary policy is set cooperatively. It turns out that in a two country setting non-cooperative fiscal policy makers have an incentive to change taxes on sales depending on shocks realizations in order to reduce output production. Therefore whether the fiscal policy is set cooperatively or not matters for optimal monetary policy decisions. Indeed, as already shown in the literature, the cooperative monetary policy maker implements the flexible price allocation only when special conditions on the value of the distortions underlying the economy are met. However, if non-cooperative fiscal policy makers set the taxes on firms sales depending on shocks realizations, these conditions cannot be satisfied; conversely, when fiscal policy is cooperative, these conditions are fulfilled. We conclude that whether implementing the flexible price allocation is optimal or not depends on the fiscal policy regime.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries Economics and Business Working Papers Series; 949
dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.title On optimal monetary and fiscal policy interactions in open economies
dc.type info:eu-repo/semantics/workingPaper
dc.date.modified 2017-07-23T02:10:26Z
dc.subject.keyword monetary and fiscal policy
dc.subject.keyword policy coordination
dc.subject.keyword Macroeconomics and International Economics
dc.rights.accessRights info:eu-repo/semantics/openAccess

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