High trend inflation and passive monetary detours

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

Risultato della ricerca: Contributo in rivistaArticolo in rivista

Abstract

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.
Lingua originaleEnglish
pagine (da-a)138-142
Numero di pagine5
RivistaEconomics Letters
Volume172
DOI
Stato di pubblicazionePubblicato - 2018

Keywords

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

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