Optimal Monetary and Fiscal Stabilisation Policies:
This paper studies optimal stabilisation policies under commitment when monetary policy sets nominal interest rates and fiscal policy decides on public expenditure, income tax rates, and issuance of nominal non-contingent debt. High levels of government debt adversely affect the steady state of the...
Gespeichert in:
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| Format: | Elektronisch E-Book |
| Sprache: | English |
| Veröffentlicht: |
Paris
OECD Publishing
2010
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| Schriftenreihe: | OECD Economics Department Working Papers
no.765 |
| Schlagworte: | |
| Online-Zugang: | Volltext |
| Zusammenfassung: | This paper studies optimal stabilisation policies under commitment when monetary policy sets nominal interest rates and fiscal policy decides on public expenditure, income tax rates, and issuance of nominal non-contingent debt. High levels of government debt adversely affect the steady state of the economy and increase aggregate volatility. The latter emerges because debt exposes the government budget to real interest rate risk and thereby induces stronger volatility of taxes and public spending. The optimal variability of fiscal deficits is found to increase with the level of government debt, while the optimal variability of nominal interest rates decreases. Overall, optimal stabilisation policy does not require annual fiscal deficits to deviate by more than 3 percentage points of GDP from their steady state value or nominal interest rates to fall all the way to zero. Only if the standard deviation of economic disturbances is two to three times larger than suggested by post-war evidence do such events occur with non-negligible probability. |
| Beschreibung: | 1 Online-Ressource (43 p.) 21 x 29.7cm. |
| DOI: | 10.1787/5kmfwj7s5pjk-en |
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| 520 | |a This paper studies optimal stabilisation policies under commitment when monetary policy sets nominal interest rates and fiscal policy decides on public expenditure, income tax rates, and issuance of nominal non-contingent debt. High levels of government debt adversely affect the steady state of the economy and increase aggregate volatility. The latter emerges because debt exposes the government budget to real interest rate risk and thereby induces stronger volatility of taxes and public spending. The optimal variability of fiscal deficits is found to increase with the level of government debt, while the optimal variability of nominal interest rates decreases. Overall, optimal stabilisation policy does not require annual fiscal deficits to deviate by more than 3 percentage points of GDP from their steady state value or nominal interest rates to fall all the way to zero. Only if the standard deviation of economic disturbances is two to three times larger than suggested by post-war evidence do such events occur with non-negligible probability. | ||
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| indexdate | 2024-11-26T14:55:53Z |
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| language | English |
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| spelling | Adam, Klaus VerfasserIn aut Optimal Monetary and Fiscal Stabilisation Policies Klaus, Adam = Politique optimale de stabilisation monétaire et budgétaire / Klaus, Adam Politique optimale de stabilisation monétaire et budgétaire Paris OECD Publishing 2010 1 Online-Ressource (43 p.) 21 x 29.7cm. Text txt rdacontent Computermedien c rdamedia Online-Ressource cr rdacarrier OECD Economics Department Working Papers no.765 This paper studies optimal stabilisation policies under commitment when monetary policy sets nominal interest rates and fiscal policy decides on public expenditure, income tax rates, and issuance of nominal non-contingent debt. High levels of government debt adversely affect the steady state of the economy and increase aggregate volatility. The latter emerges because debt exposes the government budget to real interest rate risk and thereby induces stronger volatility of taxes and public spending. The optimal variability of fiscal deficits is found to increase with the level of government debt, while the optimal variability of nominal interest rates decreases. Overall, optimal stabilisation policy does not require annual fiscal deficits to deviate by more than 3 percentage points of GDP from their steady state value or nominal interest rates to fall all the way to zero. Only if the standard deviation of economic disturbances is two to three times larger than suggested by post-war evidence do such events occur with non-negligible probability. Economics FWS01 ZDB-13-SOC FWS_PDA_SOC https://doi.org/10.1787/5kmfwj7s5pjk-en Volltext |
| spellingShingle | Adam, Klaus Optimal Monetary and Fiscal Stabilisation Policies Economics |
| title | Optimal Monetary and Fiscal Stabilisation Policies |
| title_alt | Politique optimale de stabilisation monétaire et budgétaire |
| title_auth | Optimal Monetary and Fiscal Stabilisation Policies |
| title_exact_search | Optimal Monetary and Fiscal Stabilisation Policies |
| title_full | Optimal Monetary and Fiscal Stabilisation Policies Klaus, Adam = Politique optimale de stabilisation monétaire et budgétaire / Klaus, Adam |
| title_fullStr | Optimal Monetary and Fiscal Stabilisation Policies Klaus, Adam = Politique optimale de stabilisation monétaire et budgétaire / Klaus, Adam |
| title_full_unstemmed | Optimal Monetary and Fiscal Stabilisation Policies Klaus, Adam = Politique optimale de stabilisation monétaire et budgétaire / Klaus, Adam |
| title_short | Optimal Monetary and Fiscal Stabilisation Policies |
| title_sort | optimal monetary and fiscal stabilisation policies |
| topic | Economics |
| topic_facet | Economics |
| url | https://doi.org/10.1787/5kmfwj7s5pjk-en |
| work_keys_str_mv | AT adamklaus optimalmonetaryandfiscalstabilisationpolicies AT adamklaus politiqueoptimaledestabilisationmonetaireetbudgetaire |