Fiscal policy is government economic policies that rely on economic regulation and control exercised through government taxation and budgetary policy. These 'fiscal policies' are in contrast to monetary policy which seeks to influence the direction of the economy and regulate levels of economic activity and inflation by control of both the rate of interest and the amount of money available within an economy. Monetary policy is part of the fiscal policy. Fiscal measures are frequently used in tandem with monetary policy to achieve certain specific goals. Taxation and public expenditure are the main fiscal policy instruments.
Monetary Instrument Problem Revisited: The Role of Fiscal Policy - Soyoung Kim.
Abstract: The monetary instrument problem is examined in an endowment economy model with various stochastic disturbances, with minimizing the variance of inflation as the policy objective.
Following current developments in the theory of fiscal determination of the price level, for different monetary policies, active or passive fiscal policy is specified to guarantee a unique equilibrium. Swiss Replica Watches The responses of inflation to various structural disturbances in the constant money growth rate-passive fiscal and the constant interest rate-active fiscal regime are explained based on monetary and fiscal policies role in financing government deficit changes and satisfying the government budget constraint in each regime, which is different from the explanations of past research following Poole.
One of interesting findings is that an increase in the steady state real value of nominal government debts (bonds) reduces the variance of inflation in the passive monetary-active fiscal regime.
Searching for Non-Keynesian Effects of Fiscal Policy - Francesco Giavazzi, Tullio Jappelli, Marco Pagano.
Abstract: We search for the circumstances in which the response of national saving to fiscal policy contradicts conventional Keynesian predictions, using data from 18 OECD countries. The data suggest that non-Keynesian effects tend to be associated with large and persistent fiscal impulses.
Such responses can be traced to changes in taxes and transfers more than to changes in government consumption and are stronger for fiscal contractions than expansions.replica rolex sea dweller watches During large contractions an increase in taxes has no effect on national saving. High or rapidly growing public debt is not a good predictor of non-Keynesian effects. Finally, the composition of the fiscal impulse matters: the non-Keynesian effects of a large fiscal contraction are amplified when this is carried out primarily by raising taxes.
Product Differentiation,
Fiscal Policy, and Free Entry, Luis F. Costa
Abstract: Entry is recognized to be an important issue in macro models considering
imperfectly competitive markets. However, two lines of research have been kept apart: the
homogeneous-product oligopoly approach, where entry means more firms in the industry, and
the monopolistic competition approach, where it means more brands. Competition works at both the intraindustry and sector level.
Decisions on both taxes and government expenditure are taken by the economys
government, i.e., fiscal policy is decentralised within the monetary union.
Fiscal policy is shown to be effective on aggregate output under the three
cases.
Fiscal Policy to Stabilise the Domestic Economy in the EMU: What Can We Learn from
Monetary Policy? - Lars Calmfors, Institute for International Economic
Studies, Stockholm Univ.
An important issue for the EMU countries is to what extent fiscal policy can be used to
stabilise the domestic economy in the case of asymmetric macroeconomic shocks. The paper
reviews possible reforms of national fiscal policy institutions in order to promote
efficient fiscal stabilisation policy. The conclusion is that the Fiscal Policy
Committee solution has much to speak for itself. It seems possible to delegate
fiscal stabilisation policy decisions, in much the same way as monetary policy
has been delegated to central banks, at the same time as fiscal policy decisions
focusing on income distribution and social efficiency are kept in the political
sphere. Such delegation can be made compatible with democratic accountability.
Analyzing the Interaction of Monetary and Fiscal Policy: Does Fiscal Policy Play a
Valuable Role in Stabilisation? - V. Anton Muscatelli and Patrizio Tirelli.
This paper provides an overview of recent papers which use estimated New
Keynesian models to study the extent to which fiscal policy can be used to
stabilize the economy. We use a variety of different New Keynesian models,
estimated on data for both the US and for the Euro area, and highlight the
diverse transmission channels through which fiscal policy acts in these models.
Although we find that fiscal policy can provide a useful complement to monetary
policy, especially in models where consumers have finite horizons, there are
important limitations to the value added of fiscal policy.
The Macroeconomic Role of Fiscal Policy - Christopher Allsopp,
David Vines.
Abstract: This article examines the new consensus that fiscal policy should have no
macroeconomic role in flexible inflation targeting regimes. There is little
basis for this presumption. Fiscal policy remains important in setting the policy mix and
in managing shocks and imbalances. However, when interest rates cannot be used, the
role of fiscal policy must be different. For asymmetric shocks and adjustments in EMU, fiscal
policy needs, ideally, to substitute for the interest-rate policy reaction function of the
consensus, but the difficulties are very great. There is a serious danger that orthodox
views about fiscal policy, drawn from the consensus, will be inappropriately applied,
especially in Europe.
Fiscal Policy and the Democratic Process in the European Union -
William Roberts Clark, Matt Golder, Sona Nadenichek Golder.
The construction of a monetary union with a single currency in Europe raises serious
concerns for those who understand the democratic process as one in which social groups
compete on different ideological programs. This is because it increasingly constrains
national governments of different partisan hues to follow similar fiscal and monetary
policies. We test this argument using data on fiscal policy from European Union
countries between 1981 and 1992. We find that there is still no systematic evidence for
partisan differences. Given this, it is hard to see how EMU can add to the democratic
deficit in the European Union.
Partisan Politics and Fiscal Policy - THOMAS R. CUSACK.
Does the partisan character of governing parties play a role in the formation of fiscal
policy? The conventional view is that the left tends toward excessive deficits, whereas
the right practices a more prudent fiscal policy; however, strong arguments have been
advanced that whatever room existed previously for partisanship in fiscal policy making
has been sharply reduced by developments in recent decades. The evidence
suggests that the relationship between partisanship and fiscal policy is contingent on
macroeconomic conditions. The evidence also suggests that these differences have been
reduced over recent decades.
The Political Economy of Fiscal Policy and Economic Management in Oil
Exporting Countries: Benn Eifert; Alan Gelb and Nils Borje Tallroth.
Despite massive oil rent incomes since the early 1970s, the economic performance of
oilexporting countries- with notable exceptions-is poor. While there is extensive
literature on the management of oil resources, analysis of the underlying political
determinants of this poor performance is more sparse.