Code for: Central Bank Credibility and Fiscal Responsibility

Principal Investigator(s): View help for Principal Investigator(s) Jesse Schreger, Columbia Business School; Pierre Yared, Columbia Business School; Emilio Zaratiegui, Columbia University

Version: View help for Version V1

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Project Citation:

Schreger, Jesse , Yared, Pierre, and Zaratiegui, Emilio. Code for: Central Bank Credibility and Fiscal Responsibility. Nashville, TN: American Economic Association [publisher], 2024. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2024-07-30. https://doi.org/10.3886/E196521V1

Project Description

Summary: We consider a New Keynesian model with strategic monetary and fiscal interactions. The fiscal authority maximizes social welfare. Monetary policy is delegated to a central bank with an anti-inflation bias that suffers from a lack of commitment. The impact of central bank hawkishness on debt issuance is non-monotonic because increased hawkishness reduces the benefit from fiscal stimulus while simultaneously increasing real debt capacity. Starting from high levels of hawkishness (dovishness), a marginal increase in the central bank’s anti-inflation bias decreases (increases) debt issuance

Scope of Project

Subject Terms: Policy Rules; Public debt; Optimal Taxation; Fiscal Policy; Monetary Policy

JEL Classification:
      D02 Institutions: Design, Formation, Operations, and Impact
      E58 Central Banks and Their Policies
      E62 Fiscal Policy
      H21 Taxation and Subsidies: Efficiency; Optimal Taxation
      H63 National Debt; Debt Management; Sovereign Debt

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Published Versions

V1 [2024-07-30]

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