Monetary and Fiscal Policy Interactions in the Post-war U.S [electronic resource] / Susan S Yang.
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TextSeries: IMF Working Papers; Working Paper ; No. 10/243Publication details: Washington, D.C. : International Monetary Fund, 2010Description: 1 online resource (46 p.)ISBN: 1455209430 :ISSN: 1018-5941Subject(s): Bayesian Analysis | Bayesian Estimation | Fiscal Policies and Behavior of Economic Agents: General | Inflation | Monetary and Fiscal and Monetary Policy Interactions | Monetary Authority | United StatesAdditional physical formats: Print Version:: Monetary and Fiscal Policy Interactions in the Post-war U.SOnline resources: IMF e-Library | IMF Book Store Abstract: 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.
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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