High trend inflation and passive monetary detours

Guido Ascari, Anna Paola Florio, Alessandro Gobbi, Anna Florio

Research output: Contribution to journalArticle


Does the long-run Taylor principle (Davig and Leeper, 2007) hold when both monetary and fiscal policies can switch and there is positive trend inflation? We find that with high trend inflation passive monetary detours are no longer possible, whatever fiscal policy is in place. This has important policy implications in terms of flexibility and monetary–fiscal authorities coordination.
Original languageEnglish
Pages (from-to)138-142
Number of pages5
JournalEconomics Letters
Publication statusPublished - 2018


  • Trend inflation, Monetary–fiscal policy interactions, Markov-switching, Determinacy


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