Fiscal and Monetary Policy Interaction: A Simulation-Based Analysis of a Two-Country New Keynesian DSGE Model with Heterogeneous Households

Autor:	Fabia A. de Carvalho, Marcos Valli
Rok vydání:	2010
Předmět:	Macroeconomics Index (economics) Price index Inflation targeting media_common.quotation_subject Monetary policy New Keynesian economics Wage Dynamic stochastic general equilibrium Economics Monetary economics media_common Fiscal policy
Zdroj:	SSRN Electronic Journal.
ISSN:	1556-5068
DOI:	10.2139/ssrn.1985200
Popis:	This paper models a fiscal policy that pursues primary balance targets to stabilize the debt-to-GDP ratio in an open and heterogeneous economy where firms combine public and private capital to produce their goods. The model extends the European NAWM presented in Coenen et al. (2008) and Christoffel et al. (2008) by broadening the scope for fiscal policy implementation and allowing for heterogeneity in labor skills. The domestic economy is also assumed to follow a forward looking Taylor-rule consistent with an inflation targeting regime. We correct the NAWM specification of the final-goods price indices, the recursive representation of the wage setting rule, and the wage distortion index. We calibrate the model for Brazil to analyze some implications of monetary and fiscal policy interaction and explore some of the implications of fiscal policy in this class of DSGE models.
Databáze:	OpenAIRE
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