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SNU mini-courses : Monetary and fiscal olicy interactions financial frictions and government debt

Related Document
Frame of Image ent Policy Regimes
Leeper’s framework for the analysis of monetary and fiscal policy interactions Regime M: Aggressive adjustment of the nominal interest rate for the deviation of the aggregate inflation from its target Regime F: Mild (or unresponsive) adjustment of primary surpluses for the deviation of the real public debt from its target (or changes in relevant economic conditions)
Tack Yun (SNU)
MFC
07/29/2013
2 / 21
Key Results
1
The Taylor principle may not be a sufficient condition to stabilize the aggregate inflation even with passive fiscal policy rules if the interest rate of households (relative to the policy rate) responds to changes in the public debt. In this case, anchoring the aggregate price level can come with the fiscal policy stance that creates the unresponsiveness of primary surpluses with respect to changes in the deviation of the public debt from its target or in the aggregate economic condition. This result might be more relevant at an excessively high level of the public debt and thus complements the prominent works of Leeper (1991) in which interest rate spreads are unresponsive to changes in the public debt.
2
3
Tack Yun (SNU)
MFC
07/29/2013
3 / 21
Economic Environment
1
There are a lot of infinitely-lived homogeneous households in the endowment economy at the cashless limit. There are complete financial markets for one-period ahead contingent nominal claims. There are commercial banks which take deposits from households.
The interest rate for households di


Full Text
Title SNU mini-courses
Similar Titles
Sub Title

Monetary and fiscal olicy interactions financial frictions and government debt

Material Type Proceedings
Author(English)

Yun, Tack

Author(Korean)

윤택

Publisher

[Seoul]:Seoul National University

Date 2013-08
Pages 21
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Financial Policy
Holding KDI; KDI School