Pekarski S. Fiscal and Monetary Policy Interaction. Berlin: VDM Verlag, 2009

Изданная на английском языке книга доцента кафедры макроэкономического анализа ГУ-ВШЭ Сергея Пекарского исследует взаимодействие правительства и центрального банка в сфере фискальной и денежной политики как одну из фундаментальных проблем анализа макроэкономической политики.

The government and the central bank are interconnected by a consolidated public sector budget constraint: the operational deficit of the budget is financed by new borrowings and by seigniorage. This means that, even given the central bank's formal independence of the government, the former must nevertheless take into account problems in the fiscal sphere. Thus one of the fundamental problems in the analysis of macroeconomic policy is that of the interaction between the government and the central bank in conducting fiscal and monetary policies. The thesis continues this line of inquiry. It attempts to elucidate the most general problems which may in principle arise in describing the logic of this interaction. Various results pertain to the problems of macroeconomic policy in developed countries and in economies with undeveloped financial markets.

Chapter 5. Fiscal and monetary policy interaction II: The role of expectations, inflationary and fiscal regimes

Table of Contents

Acknowledgements

Chapter 1. Introduction

1.1 Motivation
1.2 Literature on fiscal and monetary policy interaction
1.3 Outline of the thesis

Chapter 2. Fiscal and monetary policy: The basic concepts and models

2.1 Introduction
2.2 Fiscal policy, the budget deficit and the public debt
2.3 Monetary policy and inflation
2.4 The fiscal theory of inflation: "Unpleasant monetarist arithmetic"
2.5 The fiscal theory of the price level
2.6 Concluding remarks

Chapter 3. Nonlinear dynamics of inflation and public debt

3.1 Introduction
3.2 Monetization of the budget deficit: the Inflation tax Laffer curve
3.3 The effect of inflation on the real primary deficit in the inflation tax Laffer curve model
3.4 Basic model of the dynamics of public debt and inflation
3.5 A model for the dynamics of public debt and inflation with real effects of inflation
3.6 Analysis of bifurcations in the system of public debt and real money balances
3.7 The Russian crisis of 1998 as a fold bifurcation
3.8 Conclusion
Appendix. Microeconomic basis for the dynamics

Chapter 4. Fiscal and monetary policy interaction I: The role of constraints

4.1 Introduction
4.2 Stability of the backward-looking dynamics and macroeconomic policies
4.3 Unilateral monetary policy
4.4 Unilateral fiscal policy
4.5 Anti-inflationary monetary policies that requires a decrease in the budget deficit
4.6 Loose monetary policy and fiscal surpluses in Russia after the crisis, 2000–2003
4.7 Reaganomics I: a backward-looking interpretation
4.8 The policy of increasing the primary deficit by temporarily increasing the volume of seigniorage
4.9 Consequences of "unpleasant monetarist arithmetic" for fiscal policy
4.10 Feasibility constraints on the interaction of fiscal and monetary policy
4.11 Summary and conclusions
Appendix. Analysis of the transitional dynamics of the system

Chapter 5. Fiscal and monetary policy interaction II: The role of expectations, inflationary and fiscal regimes

5.1 Introduction
5.2 Sustainable macroeconomic policy
5.3 A permanent increase in the growth rate of base money
5.4 A permanent increase in the primary budget deficit
5.5 Credible stabilization programs: Israel, Chile and Mexico
5.6 A temporary decrease in the growth rate of base money
5.7 Reaganomics II: a forward-looking interpretation
5.8 Temporary changes in policy and "unpleasant monetarist arithmetic"
5.9 Unpleasant monetarist arithmetic at work: the failure of the Austral Plan in Argentina
5.10 The Asian crisis of 1997: tight monetary policy and prospective deficits
5.11 Uncertainty about the magnitude and the direction of change in the growth rate of base money
5.12 Uncertainty about the type of change in macroeconomic policy
5.13 Uncertainty about the timing of change in macroeconomic policy
5.14 Sustainability and feasibility of macroeconomic policy
5.15 Conclusion: the role of expectations and of economic regimes in the interaction of fiscal and monetary policies
Appendix. Numerical examples

Chapter 6. Conclusion

References