Optimal Inflation Targeting Under Alternative Fiscal Regimes ∗

@inproceedings{Benigno2005OptimalIT,
  title={Optimal Inflation Targeting Under Alternative Fiscal Regimes ∗},
  author={Pierpaolo Benigno and Michael Woodford},
  year={2005}
}
Flexible inflation targeting has been advocated as a practical approach to the implementation of an optimal state-contingent monetary policy, but theoretical expositions reaching this conclusion have typically abstracted from the fiscal consequences of monetary policy. Here we extend the standard theory by considering the character of optimal monetary policy under a variety of assumptions about the fiscal regime, with the standard analysis appearing only as a special case in which non… CONTINUE READING

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