Monetary and Fiscal Interactions: Short‐run and Long‐run Implications

Isaac, Alan G.

doi:10.1111/j.1467-999x.2008.00342.x

Cited by 10 publications

(6 citation statements)

References 43 publications

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“…Thus, it reveals demand‐driven level effects and fiscal policy influences even in the long run; it produces endogenous growth fluctuations, with fresh fiscal and monetary policy implications for short‐run and long‐run stability; and it generates interesting patterns of ‘apparent’ stability, which give way to (unexpected) endogenous increases in volatility under certain conditions. We believe that these results add new arguments to previous non‐mainstream contributions which have been highlighting, for a long time, the fragility of the pre‐crisis mainstream consensus (see Vogt, ; Isaac, ; Anundsen et al ., ; Hannsgen, ).…”

Section: Introductionsupporting

confidence: 77%

Rethinking Macroeconomic Policy within a Simple Dynamic Model

et al. 2016

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We propose a simple macro-dynamic model to rethink standard policy prescriptions. Our model includes exogenous growth, endogenous capital accumulation and debt, demand-driven production with a nonlinear IS curve, a dynamic Phillips curve, and fiscal and monetary policy instruments. It has multiple steady states with different stability properties, and it is analytically tractable to a significant extent. We complete the analytical results with simulations. We find alternative growth patterns, endogenous fluctuations, and demand-driven level effects even in the long-run. For certain steady states the model shows saddle-path type instabilities, which lead us to reflect on fiscal and monetary policy standards. * We would like to thank Giancarlo Gandolfo, Giovanni Dosi, Mario Pianta, the Editors and three anonymous referees of Metroeconomica for their helpful comments on previous versions of this work. This work has been supported by the S10 Research Group (DGA-Spain/FSE).By combining these elements, we arrive at a non-linear aggregative (nonmainstream) model which, nevertheless, may be recognizable even for mainstream economists. A strong point of the model is that it is tractable, transparent, and it allows us to revise some of the (contemporary) mainstream prescriptions at the light of well established (classical, but updated) 426Isabel Almudi et al.

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Section: Introductionsupporting

confidence: 77%

Rethinking Macroeconomic Policy within a Simple Dynamic Model

et al. 2016

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“…Stabilization issues have been addressed by a substantial (post‐) Keynesian literature, including Lima and Setterfield (), Isaac (), Shaikh (), Asada et al (), Hannsgen (), Franke (), Costa Lima et al . () and Mason and Jayadev ().…”

Section: Introductionmentioning

confidence: 99%

Fiscal and Monetary Policy Rules in an Unstable Economy

Ryoo

Skøtt

2016

Metroeconomica

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This paper examines the implications of different monetary and fiscal policy rules in an economy characterized by Harrodian instability. We show that (i) a monetary rule along Taylor lines can be stabilizing for low debt ratios but becomes de-stabilizing if the debt ratio exceeds a certain threshold, (ii) a 'Keynesian' fiscal policy rule can stabilize the economy at full employment, (iii) a fiscal 'austerity' rule that links fiscal parameters to deviations from a target debt ratio fails to adjust the 'warranted' to the 'natural' growth rate and destabilizes the warranted path, (iv) instability may arise from a combination of fiscal and monetary policy rules which separately would stabilize the system, and (v) austerity rules can in some circumstances enhance the stabilizing effects of monetary policy.JEL classification: E12, E52, E62, E63

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“…15 Here, we show the effect of a decrease in π on capacity utilization and the short-run growth rate. 16 The value of ∂u ∂π is negative when evaluated in the short-run equilibrium condition, although the sign is ambiguous; g π π − g 2 u is negative (positive), when the model uses the WG (PG). …”

Section: Short Runmentioning

confidence: 99%

The role of the Taylor principle in the neo-Kaleckian model when applied to an endogenous market structure

Ohno

2014

Structural Change and Economic Dynamics

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This study examines the effect of using the neo-Kaleckian model to target inflation. Here, we assume the following: a model with monopolistic competition, a symmetric economy, the inflation conflict theory, the target profit share of firms depends on the number of firms, and free entry. Using the neo-Kaleckian model, we find the Taylor principle destabilizes the system, which means that an inelastic nominal interest monetary policy is a plausible way to ensure stability. In addition, we find that the Taylor principle is not compatible with the standard neo-Kaleckian results, including the effects of independent demand and income distribution in favour of workers.

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Monetary and Fiscal Interactions: Short‐run and Long‐run Implications

Cited by 10 publications

References 43 publications

Rethinking Macroeconomic Policy within a Simple Dynamic Model

Rethinking Macroeconomic Policy within a Simple Dynamic Model

Fiscal and Monetary Policy Rules in an Unstable Economy

The role of the Taylor principle in the neo-Kaleckian model when applied to an endogenous market structure

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