Articlegold2004

The Time Consistency of Optimal Monetary and Fiscal Policies

Fernando E. Alvarez · Patrick J. Kehoe · Pablo Andrés Neumeyer

76 citations0/0 files storedEconometrica

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Monetary Policy and Economic Impact Fiscal Policies and Political Economy Economic theories and models

Abstract

Are optimal monetary and fiscal policies time consistent in a monetary economy?Yes, but if and only if under commitment the Friedman rule of setting nominal interest rates to zero is optimal.This result is of applied interest because the Friedman rule is optimal for the standard preferences used in applied work, those consistent with the growth facts.

Citations in this library

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References

1927A Contribution to the Theory of Taxation 1983Optimal fiscal and monetary policy in an economy without capital 1978On the Time Consistency of Optimal Policy in a Monetary Economy 2000Inflation and Welfare 1959Economic Policy: Principles and Design 1990Sustainable Plans 1996Optimality of the Friedman rule in economies with distorting taxes 1993Optimality of the Friedman Rule in Economies with Distorting Taxes

Cited by

2014Optimal Time-Consistent Government Debt Maturity 2008Nominal Debt as a Burden to Monetary Policy 2016Understanding Inflation as a Joint Monetary-Fiscal Phenomenon 2011On the joint determination of fiscal and monetary policy 2006Beware of Emigrants Bearing Gifts 2015Debt, inflation and central bank independence 2022Time Consistency and Duration of Government Debt: A Model of Quantitative Easing

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