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Conference Paper: Inflation dynamics: the role of public debt and policy regimes
Title | Inflation dynamics: the role of public debt and policy regimes |
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Authors | |
Keywords | Time-varying in ation target In ation response Monetary and fiscal policy regimes Public debt Monetary and scal policy stances DSGE model |
Issue Date | 2012 |
Citation | The 60th Anniversary of the Korea Economic Association and the 15th International Conference, Seoul, South Korea, 20 June 2012. How to Cite? |
Abstract | We investigate the impact of a time-varying inflation target and changing monetary and fiscal policy stances on the dynamics of inflation in a DSGE model. Under an active monetary and passive fiscal policy regime, inflation closely follows the path of the inflation target and a stronger reaction of monetary policy to inflation decreases the equilibrium response of inflation to non-policy shocks. In sharp contrast, under an active fiscal and passive monetary policy regime, inflation moves in an opposite direction from the inflation target and a stronger reaction of monetary policy to inflation increases the equilibrium response of inflation to non-policy shocks. Moreover, a weaker response of fiscal policy to debt decreases the response of inflation to non-policy shocks. These results are due to variation in the value of public debt that lead to wealth effects on households. Finally, under a passive monetary and passive fiscal policy regime, because of equilibrium indeterminacy, theory provides no clear answer on the behavior of inflation. We characterize these results analytically in a simple model and numerically in a richer quantitative model. |
Description | Session III-7: Macroeconomics IV - Policy Regimes and DSGE Models |
Persistent Identifier | http://hdl.handle.net/10722/160853 |
DC Field | Value | Language |
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dc.contributor.author | Bhattarai, S | en_US |
dc.contributor.author | Lee, JW | en_US |
dc.contributor.author | Park, WY | en_US |
dc.date.accessioned | 2012-08-16T06:22:14Z | - |
dc.date.available | 2012-08-16T06:22:14Z | - |
dc.date.issued | 2012 | en_US |
dc.identifier.citation | The 60th Anniversary of the Korea Economic Association and the 15th International Conference, Seoul, South Korea, 20 June 2012. | en_US |
dc.identifier.uri | http://hdl.handle.net/10722/160853 | - |
dc.description | Session III-7: Macroeconomics IV - Policy Regimes and DSGE Models | - |
dc.description.abstract | We investigate the impact of a time-varying inflation target and changing monetary and fiscal policy stances on the dynamics of inflation in a DSGE model. Under an active monetary and passive fiscal policy regime, inflation closely follows the path of the inflation target and a stronger reaction of monetary policy to inflation decreases the equilibrium response of inflation to non-policy shocks. In sharp contrast, under an active fiscal and passive monetary policy regime, inflation moves in an opposite direction from the inflation target and a stronger reaction of monetary policy to inflation increases the equilibrium response of inflation to non-policy shocks. Moreover, a weaker response of fiscal policy to debt decreases the response of inflation to non-policy shocks. These results are due to variation in the value of public debt that lead to wealth effects on households. Finally, under a passive monetary and passive fiscal policy regime, because of equilibrium indeterminacy, theory provides no clear answer on the behavior of inflation. We characterize these results analytically in a simple model and numerically in a richer quantitative model. | - |
dc.language | eng | en_US |
dc.relation.ispartof | 15th KEA Conference | en_US |
dc.subject | Time-varying in ation target | - |
dc.subject | In ation response | - |
dc.subject | Monetary and fiscal policy regimes | - |
dc.subject | Public debt | - |
dc.subject | Monetary and scal policy stances | - |
dc.subject | DSGE model | - |
dc.title | Inflation dynamics: the role of public debt and policy regimes | en_US |
dc.type | Conference_Paper | en_US |
dc.identifier.email | Park, WY: wypark@hku.hk | en_US |
dc.identifier.authority | Park, WY=rp01552 | en_US |
dc.description.nature | postprint | - |
dc.identifier.hkuros | 204619 | en_US |