On optimal monetary and fiscal policy interactions in open economies

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• dc.contributor.author Forlati, Chiaraca
• 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.date.modified 2017-07-23T02:10:26Z
• 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/pdfca
• dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=949
• dc.identifier.uri http://hdl.handle.net/10230/1183
• 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.accessRights info:eu-repo/semantics/openAccess
• dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
• dc.subject.keyword monetary and fiscal policy
• dc.subject.keyword policy coordination
• dc.subject.keyword Macroeconomics and International Economics
• dc.title On optimal monetary and fiscal policy interactions in open economiesca
• dc.type info:eu-repo/semantics/workingPaper