Jointly optimal monetary and fiscal policy rules under borrowing constraints

Jointly optimal monetary and fiscal policy rules under borrowing constraints / prepared by Huizin Bi and Michael Kumhof.

We study the welfare properties of an economy where both monetary and fiscal policy follow simple rules, and where a subset of agents is borrowing constrained. The optimized fiscal rule is far more aggressive than automatic stabilizers, and stabilizes the income of borrowing constrained agents, rath...

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Bibliographic Details
Main Authors: Bi, Huixin (Author), Kumhof, Michael (Author)
Corporate Author: International Monetary Fund. Research Department
Format: eBook
Language:English
Published: [Washington, D.C.] : International Monetary Fund, ©2009.
Series:IMF working paper ; WP/09/286.
Subjects:
Monetary policy > Econometric models.
Fiscal policy > Econometric models.
Loans > Econometric models.
Credit > Econometric models.
Credit > Econometric models
Fiscal policy > Econometric models
Loans > Econometric models
Monetary policy > Econometric models
Online Access:Click for online access
Table of Contents:
  • Intro
  • Contents
  • I. Introduction
  • II. The Model
  • A. Infinitely-Lived Households
  • B. Borrowing-Constrained Households
  • C. Firms
  • D. Government
  • 1. Monetary Policy
  • 2. Budget Constraint
  • 3. Fiscal Policy
  • E. Competitive Equilibrium
  • F. Aggregate Welfare
  • III. Calibration
  • IV. Results
  • A. Impulse Responses
  • 1. Fiscal Policy Rule Parameters
  • 2. Monetary Policy Rule Parameters
  • B. Welfare under Different Shocks
  • C. Welfare and Volatility
  • 1. Welfare and Volatility of Policy Instruments
  • 2. Efficiency Frontiers
  • 3. Alternative Fiscal Instruments
  • 4. Alternative Fiscal Rules
  • 5. Comparison with the Canonical Infinite-Horizon Case
  • V. Conclusion
  • References
  • Tables
  • 1. Moments of the Data and the Model
  • Figures
  • 1. Positive Technology Shock, Different dtax
  • 2. Negative Investment Shock, Different dtax
  • 3. Positive Consumption Shock, Different dtax
  • 4. Positive Technology Shock, Different dpie
  • 5. Positive Technology Shock, Different dpie, No Liquidity-Constrained Agents .
  • 6. Positive Technology Shock, Different di
  • 7. Welfare
  • Technology Shock
  • 8. Welfare
  • Investment Shock
  • 9. Welfare
  • Consumption Shock
  • 10. Welfare
  • All Shocks
  • 11. Welfare and Policy Instrument Volatility
  • 12. Welfare-Fiscal Volatility Efficiency Frontier
  • 13. Welfare Comparison across Fiscal Instruments
  • 14. 100 Percent Infinitely-Lived Agents
  • Welfare
  • 2 Dimensional
  • 15. 100 Percent Infinitely-Lived Agents
  • Welfare
  • 1 Dimensional.

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