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Optimal monetary policy when lump-sum taxes are unavailable : a reconsideration of the outcomes under commitment and discretion
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Ellison, Martin and Rankin, Nell (2007) Optimal monetary policy when lump-sum taxes are unavailable : a reconsideration of the outcomes under commitment and discretion. Journal of Economic Dynamics and Control, Volume 31 (Number 1). pp. 219-243. doi:10.1016/j.jedc.2005.09.014 ISSN 0165-1889.
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Official URL: http://dx.doi.org/10.1016/j.jedc.2005.09.014
Abstract
We re-examine optimal monetary policy when lump-sum taxes are unavailable. Under commitment, we show that, with alternative utility functions to that considered in Nicolini's related analysis, the direction of the incentive to cheat may depend on the initial level of government debt, with low debt creating an incentive towards surprise deflation, but high debt the reverse. Under discretion, we show that the economy will not necessarily tend to the Friedman Rule, as Obstfeld found. Instead it may tend to the critical debt level at which there is no cheating incentive under commitment, and inflation and could well be positive here.
Item Type: | Journal Article | ||||
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Subjects: | H Social Sciences > HC Economic History and Conditions | ||||
Divisions: | Faculty of Social Sciences > Economics | ||||
Journal or Publication Title: | Journal of Economic Dynamics and Control | ||||
Publisher: | Elsevier BV | ||||
ISSN: | 0165-1889 | ||||
Official Date: | January 2007 | ||||
Dates: |
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Volume: | Volume 31 | ||||
Number: | Number 1 | ||||
Number of Pages: | 25 | ||||
Page Range: | pp. 219-243 | ||||
DOI: | 10.1016/j.jedc.2005.09.014 | ||||
Status: | Peer Reviewed | ||||
Publication Status: | Published | ||||
Access rights to Published version: | Restricted or Subscription Access |
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