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Monetary and Fiscal Policy Interactions in the Post-war U.S
Author:
Ms. Susan S. Yang
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and
Ms. Nora Traum null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2010: Issue 243
Language:
English
Publication Date:
01 Nov 2010
DOI:
https://doi.org/10.5089/9781455209439.001
ISBN:
9781455209439
ISSN:
1018-5941
Pages:
46
Keywords:
WP; monetary policy; government spending; nominal interest rate
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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A New Keynesian model allowing for an active monetary and passive fiscal policy (AMPF) regime and a passive monetary and active fiscal policy (PMAF) regime is fit to various U.S. samples from 1955 to 2007. Data in the pre-Volcker periods strongly prefer an AMPF regime, but the estimation is not very informative about whether the inflation coefficient in the interest rate rule exceeds one in pre-Volcker samples. Also, whether a government spending increase yields positive consumption in a PMAF regime depends on price stickiness. An income tax cut can yield a negative labor response if monetary policy aggressively stabilizes output.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund