Central Bank Credibility and Fiscal Responsibility / Jesse Schreger, Pierre Yared, Emilio Zaratiegui.

Format:

Book

Author/Creator:

Schreger, Jesse.

Contributor:

National Bureau of Economic Research.

Yared, Pierre.

Zaratiegui, Emilio.

Series:

Working Paper Series (National Bureau of Economic Research) no. w31246.

NBER working paper series no. w31246

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

We consider a New Keynesian model with strategic monetary and fiscal interactions. The fiscal authority maximizes social welfare. Monetary policy is delegated to a central bank with an anti-inflation bias that suffers from a lack of commitment. The impact of central bank hawkishness on debt issuance is non-monotonic because increased hawkishness reduces the benefit from fiscal stimulus while simultaneously increasing real debt capacity. Starting from high levels of hawkishness (dovishness), a marginal increase in the central bank's anti-inflation bias decreases (increases) debt issuance.

Notes:

Print version record

May 2023.