Chadha, J.S. and Nolan, C. (2004) Interest rate bounds and fiscal policy. Economics Letters, 84(1), pp. 9-15. (doi: 10.1016/j.econlet.2003.12.001)
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Abstract
When the monetary authority controls the short-term interest rate we find that under a regime of permanent (and even persistent but temporary) deficits that a strict upper bound on the feasible interest rate sequence is present. More generally, the satisfaction of the fiscal authority's present-value budget constraint in the presence of a deficit sequence, means that monetary and fiscal decisions cannot be independent. This is an important caveat to the results in McCallum [J. Political Econ. 92 (1984) 123].
| Item Type: | Articles |
|---|---|
| Status: | Published |
| Refereed: | Yes |
| Glasgow Author(s) Enlighten ID: | Nolan, Professor Charles |
| Authors: | Chadha, J.S., and Nolan, C. |
| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HJ Public Finance |
| College/School: | College of Social Sciences > Adam Smith Business School > Economics |
| Journal Name: | Economics Letters |
| ISSN: | 0165-1765 |
| ISSN (Online): | 1873-7374 |
| Published Online: | 05 March 2004 |
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