Optimal fiscal and monetary policy: some recent results

Abstract: This paper studies the quantitative properties of fiscal and monetary policy in business cycle models. In terms of fiscal policy, optimal labor tax rates are virtually constant and optimal capital income tax rates are close to zero on average. In terms of monetary policy, the Friedman rule is optimal?nominal interest rates are zero?and optimal monetary policy is activist in the sense that it responds to shocks to the economy.

Keywords: Monetary policy; Fiscal policy;

Status: Published in Journal of Money, Credit, and Banking (Vol.23, n.3, Part 2, August 1991, pp. 519-539)

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Bibliographic Information

Provider: Federal Reserve Bank of Minneapolis

Part of Series: Staff Report

Publication Date: 1991

Number: 147