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Fiscal and Monetary Regimes: A Strategic Approach



Type:   Working paper
Titre:   Fiscal and Monetary Regimes: A Strategic Approach
Auteur(s):   Plantin, Guillaume - Département d'économie (Auteur)
Barthélemy, Jean - Département d'économie (Auteur)
Date de publication:   2018-05
Éditeur:   Centre for Economic Policy Research
Collection:   CEPR Discussion Papers  :  DP 12903
Résumé:   [en] This paper develops a full-fledged strategic analysis of Wallace’s “game of chicken”. A public sector facing legacy nominal liabilities is comprised of fiscal and monetary authorities that respectively set the primary surplus and the price level in a non-cooperative fashion. We find that the post 2008 feature of indefinitely postponed fiscal consolidation and rapid expansion of the Federal Reserve’s balance sheet is consistent with a strategic setting in which neither authority can commit to a policy beyond its current mandate, and the fiscal authority has more bargaining power than the monetary one at each date.


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