Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/103830 
Year of Publication: 
2013
Series/Report no.: 
Sveriges Riksbank Working Paper Series No. 278
Publisher: 
Sveriges Riksbank, Stockholm
Abstract: 
We reconsider the role of an inflation conservative central banker in a setting with distortionary taxation. To do so, we assume monetary and fiscal policy are decided by independent authorities that do not abide to past commitments. If the two authorities make policy decisions simultaneously, inflation conservatism causes fiscal overspending. But if fiscal policy is determined before monetary policy, inflation conservatism imposes fiscal discipline. These results clarify that in our setting the value of inflation conservatism depends crucially on the timing of policy decisions.
Subjects: 
optimal policy
lack of commitment
conservative monetary policy
JEL: 
E52
E62
E63
Document Type: 
Working Paper

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