Optimal Simple Monetary and Fiscal Rules under Limited Asset Market Participation

Motta, Giorgio and Tirelli, Patrizio (2012) Optimal Simple Monetary and Fiscal Rules under Limited Asset Market Participation. Journal of Money, Credit and Banking, 44 (7). 1351–1374. ISSN 0022-2879

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Abstract

The combination of limited asset market participation and consumption habits generates indeterminacy for empirically plausible calibrations of a business cycle model characterized by price and nominal wage rigidities. Equilibrium determinacy is restored by demand management policies based on simple fiscal rules. In this regard, fiscal control of nominal income growth is particularly effective. In addition the complementarity between the Taylor rule and the fiscal feedback on nominal income growth produces relatively large welfare gains, limiting both aggregate and intragroup volatilities.

Item Type:
Journal Article
Journal or Publication Title:
Journal of Money, Credit and Banking
Uncontrolled Keywords:
/dk/atira/pure/core/keywords/economics
Subjects:
?? rule of thumb consumersdsgedeterminacylimited asset market participationtaylor principleoptimal simple ruleautomatic stabilizerseconomicsfinanceeconomics and econometricsaccountinghb economic theory ??
ID Code:
60030
Deposited By:
Deposited On:
16 Nov 2012 11:33
Refereed?:
Yes
Published?:
Published
Last Modified:
08 Nov 2024 01:16