NDLI: POLICY GAMES, DISTRIBUTIONAL CONFLICTS, AND THE OPTIMAL INFLATION

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POLICY GAMES, DISTRIBUTIONAL CONFLICTS, AND THE OPTIMAL INFLATION

Content Provider	Scilit
Author	Albonico, Alice Rossi, Lorenza
Copyright Year	2014
Description	This paper shows that limited asset-market participation (LAMP) generates an extra inflation bias when the fiscal and the monetary authority play strategically. A fully redistributive fiscal policy eliminates the extra inflation bias, but at the cost of reducing Ricardians' welfare. A fiscal authority that redistributes income only partially reduces the inflation bias, but raises government spending. Although a fully conservative monetary policy is necessary to get price stability, it implies a reduction in liquidity-constrained consumers' welfare, in the absence of redistributive fiscal policies. Finally, under a crisis scenario, none of the policy regimes is able to avoid the fall in economic activity when the increase in the fraction of LAMP is coupled with a negative technology shock, whereas optimal policy can avoid recession when it responds to the increase in LAMP proportion alone.
Related Links	http://pdfs.semanticscholar.org/3fe7/72036401e0ff52a38dec0627d65a1a2a74f5.pdf https://www.cambridge.org/core/services/aop-cambridge-core/content/view/3D9C6891B4BADDF17938AE9080F27478/S1365100513000825a.pdf/div-class-title-policy-games-distributional-conflicts-and-the-optimal-inflation-div.pdf
Ending Page	1293
Page Count	33
Starting Page	1261
ISSN	13651005
e-ISSN	14698056
DOI	10.1017/s1365100513000825
Journal	Macroeconomic Dynamics
Issue Number	6
Volume Number	19
Language	English
Publisher	Cambridge University Press (CUP)
Publisher Date	2015-09-01
Access Restriction	Open
Subject Keyword	Macroeconomic Dynamics Limited Asset Market Participation Optimal Monetary and Fiscal Policy Strategic Interaction
Content Type	Text
Resource Type	Article
Subject	Economics and Econometrics

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