Optimal Fiscal and Monetary Policy in a Medium-Scale Macroeconomic Model

@inproceedings{Uribe2005OptimalFA,
  title={Optimal Fiscal and Monetary Policy in a Medium-Scale Macroeconomic Model},
  author={Stephanie Schmitt - Groh{\'e} Mart́ın Uribe},
  year={2005}
}
  • Stephanie Schmitt - Grohé Mart́ın Uribe
  • Published 2005
In this paper, we study Ramsey-optimal fiscal and monetary policy in a mediumscale model of the U.S. business cycle. The model features a rich array of real and nominal rigidities that have been identified in the recent empirical literature as salient in explaining observed aggregate fluctuations. The main result of the paper is that price stability appears to be a central goal of optimal monetary policy. The optimal rate of inflation under an income tax regime is half a percent per year with a… CONTINUE READING
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