Autori:
Nisticò, Salvatore ,
Di Giorgio, Giorgio Titolo:
Fiscal deficits, current account dynamics and monetary policyPeriodico:
Ministero dell'Economia e delle Finanze. Dipartimento del Tesoro. Working paperAnno:
2008 - Volume:
7 - Fascicolo:
8 - Pagina iniziale:
1 - Pagina finale:
42This paper develops a stochastic two-country “perpetual youth” Dynamic New Keynesian
model of the international business cycle with incomplete international financial markets and
stationary net foreign assets. The model allows for a thorough analysis of the interaction of
endogenous monetary policy with endogenous, non-balanced budget fiscal policy.
We derive the dynamic and cyclical properties of fiscal deficit feedback rules under
alternative monetary regimes, discuss the international transmission of productivity shocks, and
the implications for net foreign assets and exchange rate dynamics. Our results imply that the
degree of “fiscal discipline”, i.e. the extent to which the fiscal rule responds to debt dynamics, is
crucial for the dynamics of net foreign assets. We show that under low fiscal discipline
(characterizing most industrialized countries, first and foremost the U.S.) temporary positive
productivity shocks may result in highly persistent deteriorations of the external position in the
medium run. Our results also suggest that any attempt by monetary policy alone to stabilize the
dynamics of net foreign assets would induce excessive and costly fluctuations of the exchange
rate.
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SICI: 1972-411X(2008)7:8<1:FDCADA>2.0.ZU;2-F
Testo completo:
http://www.dt.mef.gov.it/export/sites/sitodt/modules/documenti_it/analisi_progammazione/analisi_programmazione_economico/n.-8-2008---Fiscal-Deficits--Current-Account-Dynamics-and-Monetary-Policy.pdfEsportazione dati in Refworks (solo per utenti abilitati)
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