Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212414 
Year of Publication: 
2018
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 6/2018
Publisher: 
Bank of Finland, Helsinki
Abstract: 
According to the long-run Taylor principle (Davig and Leeper, 2007), a central bank can deviate to a passive monetary policy and still obtain equilibrium uniqueness if a sufficiently aggressive monetary policy is expected for the future. Does this principle hold true when both monetary and fiscal policies can switch between active and passive and there is positive trend inflation? We find that passive monetary detours are no longer possible when trend inflation is high, whatever fiscal policy is in place. This has important policy implications in terms of flexibility and monetary-fiscal authorities coordination.
JEL: 
E52
E62
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-218-1
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.