The Choice of Monetary Regime: Fiscal Implications

Research output: Working paperResearch

Abstract

The article examines how government spending is determined in a closedeconomy where the nominal wage is pre-set through contracts and the wage settershave perfect foresight regarding subsequent policy decisions. The monetaryregime affects government spending because: (i) with a pre-set nominal wage, agiven change in government spending has different effects on employment andinflation under different monetary regimes, and (ii) the authorities' inclinationto expand government spending is affected by the inflation rate which dependson the monetary regime. If the costs related to inflation are high, a comparisonbetween monetary regimes suggests that welfare is highest under nominalincome targeting where the nominal income target is determined to bring aboutprice stability.Keywords: Monetary regimes; fiscal policy; monetary non-neutrality.JEL classicification: E42, E61, E62.
The article examines how government spending is determined in a closedeconomy where the nominal wage is pre-set through contracts and the wage settershave perfect foresight regarding subsequent policy decisions. The monetaryregime affects government spending because: (i) with a pre-set nominal wage, agiven change in government spending has different effects on employment andinflation under different monetary regimes, and (ii) the authorities' inclinationto expand government spending is affected by the inflation rate which dependson the monetary regime. If the costs related to inflation are high, a comparisonbetween monetary regimes suggests that welfare is highest under nominalincome targeting where the nominal income target is determined to bring aboutprice stability.Keywords: Monetary regimes; fiscal policy; monetary non-neutrality.JEL classicification: E42, E61, E62.
LanguageEnglish
Place of PublicationKøbenhavn
PublisherCopenhagen Business School [wp]
Number of pages23
ISBN (Print)8790705912
StatePublished - 2005

Keywords

    Cite this

    Østrup, F. (2005). The Choice of Monetary Regime: Fiscal Implications. København: Copenhagen Business School [wp].
    Østrup, Finn. / The Choice of Monetary Regime : Fiscal Implications. København : Copenhagen Business School [wp], 2005.
    @techreport{fc417b00e8c611db84f6000ea68e967b,
    title = "The Choice of Monetary Regime: Fiscal Implications",
    abstract = "The article examines how government spending is determined in a closedeconomy where the nominal wage is pre-set through contracts and the wage settershave perfect foresight regarding subsequent policy decisions. The monetaryregime affects government spending because: (i) with a pre-set nominal wage, agiven change in government spending has different effects on employment andinflation under different monetary regimes, and (ii) the authorities' inclinationto expand government spending is affected by the inflation rate which dependson the monetary regime. If the costs related to inflation are high, a comparisonbetween monetary regimes suggests that welfare is highest under nominalincome targeting where the nominal income target is determined to bring aboutprice stability.Keywords: Monetary regimes; fiscal policy; monetary non-neutrality.JEL classicification: E42, E61, E62.",
    keywords = "L{\o}nteori, Inflation, Pengepolitik, Offentlige udgifter, monetary non-neutrality, fiscal policy, Monetary regimes",
    author = "Finn {\O}strup",
    year = "2005",
    language = "English",
    isbn = "8790705912",
    publisher = "Copenhagen Business School [wp]",
    address = "Denmark",
    type = "WorkingPaper",
    institution = "Copenhagen Business School [wp]",

    }

    Østrup, F 2005 'The Choice of Monetary Regime: Fiscal Implications' Copenhagen Business School [wp], København.

    The Choice of Monetary Regime : Fiscal Implications. / Østrup, Finn.

    København : Copenhagen Business School [wp], 2005.

    Research output: Working paperResearch

    TY - UNPB

    T1 - The Choice of Monetary Regime

    T2 - Fiscal Implications

    AU - Østrup,Finn

    PY - 2005

    Y1 - 2005

    N2 - The article examines how government spending is determined in a closedeconomy where the nominal wage is pre-set through contracts and the wage settershave perfect foresight regarding subsequent policy decisions. The monetaryregime affects government spending because: (i) with a pre-set nominal wage, agiven change in government spending has different effects on employment andinflation under different monetary regimes, and (ii) the authorities' inclinationto expand government spending is affected by the inflation rate which dependson the monetary regime. If the costs related to inflation are high, a comparisonbetween monetary regimes suggests that welfare is highest under nominalincome targeting where the nominal income target is determined to bring aboutprice stability.Keywords: Monetary regimes; fiscal policy; monetary non-neutrality.JEL classicification: E42, E61, E62.

    AB - The article examines how government spending is determined in a closedeconomy where the nominal wage is pre-set through contracts and the wage settershave perfect foresight regarding subsequent policy decisions. The monetaryregime affects government spending because: (i) with a pre-set nominal wage, agiven change in government spending has different effects on employment andinflation under different monetary regimes, and (ii) the authorities' inclinationto expand government spending is affected by the inflation rate which dependson the monetary regime. If the costs related to inflation are high, a comparisonbetween monetary regimes suggests that welfare is highest under nominalincome targeting where the nominal income target is determined to bring aboutprice stability.Keywords: Monetary regimes; fiscal policy; monetary non-neutrality.JEL classicification: E42, E61, E62.

    KW - Lønteori

    KW - Inflation

    KW - Pengepolitik

    KW - Offentlige udgifter

    KW - monetary non-neutrality

    KW - fiscal policy

    KW - Monetary regimes

    M3 - Working paper

    SN - 8790705912

    BT - The Choice of Monetary Regime

    PB - Copenhagen Business School [wp]

    CY - København

    ER -

    Østrup F. The Choice of Monetary Regime: Fiscal Implications. København: Copenhagen Business School [wp]. 2005.