Time consistency of fiscal and monetary policy
Subtitle: a solution
By: by Mats Persson, Torsten Persson, Lars E.O. Svensson.
Contributors: Persson, Torsten.; Svensson, Lars E. O.; National Bureau of Economic Research.
Series: NBER working paper series -- no. 11088.; Working paper series (National Bureau of Economic Research) -- working paper no. 11088.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 21
Subjects: Fiscal policy -- Econometric models; Monetary policy -- Econometric models
Description: "This paper demonstrates how time consistency of the Ramsey policy - the optimal fiscal and monetary policy under commitment - can be achieved. Each government should leave its successor with a unique maturity structure for the nominal and indexed debt, such that the marginal benefit of a surprise inflation exactly balances the marginal cost. Unlike in earlier papers on the topic, the result holds for quite a general Ramsey policy, including timevarying polices with positive inflation and positive nominal interest rates. We compare our results with those in Persson, Persson, and Svensson (1987), Calvo and Obstfeld (1990), and Alvarez, Kehoe, and Neumeyer (2004)"--National Bureau of Economic Research web site.
Notes: "January 2005."

Includes bibliographical references (p. 20-21).

Also available in PDF from the NBER world wide web site (www.nber.org).