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| Author: | Kirsanova, T. Leith, C. Wren-Lewis, S. |
| Title: | Monetary and fiscal policy interaction: The current consensus assignment in the light of recent developments |
| Journal: | Economic Journal
2009 : NOV, VOL. 119:541, p. 482-496 |
| Index terms: | econometric models economic policy monetary policy fiscal policy inflation demand |
| Language: | eng |
| Abstract: | This article explores whether there is support for the consensus assignment, where monetary policy (here as: mon-pol.) controls demand and inflation and fiscal policy (here as: fsc-pol.) controls government debt. It is argued that the basic structure of New Keynesian models implies that mon-pol. dominates fsc-pol. as a way of controlling inflation. No similar dominance seems to operate for fsc-pol. and debt, if debt has to return to its initial level after shocks. |
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