The power of forward guidance and the fiscal theory of the price level

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dc.contributor Bank of Finland McClung, Nigel 2018-10-29T14:20:00Z 2018-10-29T14:20:00Z 2018
dc.identifier.isbn 978-952-323-246-4
dc.identifier.issn 1456-6184
dc.description.abstract Standard New Keynesian models predict implausibly large and favorable responses of inflation and output to expansionary forward guidance on interest rates. We find that the introduction of permanent or recurring active fiscal policy dampens the response of output and inflation to forward guidance in the New Keynesian model. Moreover, the presence of regime-switching policy introduces expectation e ects that cause forward guidance to be less stimulative in our regime-switching model's active money, passive fiscal policy regime. Finally, the introduction of long-term debt a ects the magnitude of the stimulus resulting from forward guidance in models with active fiscal policy.
dc.format.extent 33
dc.language.iso ENG
dc.subject korot
dc.subject.other Forward Guidance
dc.subject.other Monetary-Fiscal Policy Interactions
dc.subject.other Markov-Switching
dc.title The power of forward guidance and the fiscal theory of the price level
dc.type Paper
dc.identifier.urn URN:NBN:fi:bof-201810292109
dc.subject.jel E63
dc.subject.jel D84
dc.subject.jel E50
dc.subject.jel E52
dc.subject.jel E58
dc.subject.jel E60 Bank of Finland Research Discussion Papers
dc.series.year 2018
dc.series.number 21/2018
dc.series.sortingnumber 0021 29.10.2018
dc.subject.yso finanssipolitiikka
dc.subject.yso rahapolitiikka
dc.subject.yso taloudelliset mallit
dc.subject.yso tuotanto
dc.subject.yso inflaatio
dc.subject.yso hinnat
bof-internal.includedInCRIS 1
dc.type.okm D4

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