Does the long-run Taylor principle (Davig and Leeper, 2007) hold when both monetary and fiscal policies can switch and there is positive trend inflation? We find that with high trend inflation passive monetary detours are no longer possible, whatever fiscal policy is in place. This has important policy implications in terms of flexibility and monetary–fiscal authorities coordination.
High trend inflation and passive monetary detours
Ascari G.;
2018-01-01
Abstract
Does the long-run Taylor principle (Davig and Leeper, 2007) hold when both monetary and fiscal policies can switch and there is positive trend inflation? We find that with high trend inflation passive monetary detours are no longer possible, whatever fiscal policy is in place. This has important policy implications in terms of flexibility and monetary–fiscal authorities coordination.File in questo prodotto:
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