In:
American Economic Review, American Economic Association, Vol. 102, No. 3 ( 2012-05-01), p. 173-178
Abstract:
Using a micro-founded model and a likelihood-based inference method, we show that while a passive monetary and passive fiscal policy regime prevailed in the U.S. before Paul Volcker's chairmanship at the Federal Reserve, an active monetary and passive fiscal policy regime prevailed after his appointment. Since both monetary and fiscal policies were passive pre-Volcker, equilibrium indeterminacy was a feature of the economy. Finally, pre-Volcker, the effects of unanticipated policy shifts were substantially different from those predicted by conventional monetary models: unanticipated increases in interest rates increased inflation and output, while unanticipated increases in lump-sum taxes decreased inflation and output.
Type of Medium:
Online Resource
ISSN:
0002-8282
DOI:
10.1257/aer.102.3.173
Language:
English
Publisher:
American Economic Association
Publication Date:
2012
detail.hit.zdb_id:
203590-X
detail.hit.zdb_id:
2009979-4
