Money, Debt and Prices in the United Kingdom, 1705–1996

Janssen, Norbert; Nolan, Charles R.; Thomas, Ryland

doi:10.1111/1468-0335.00294

Cited by 18 publications

(15 citation statements)

References 17 publications

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“…A number of authors have computed regressions of budget surpluses and government debt to draw inferences about the source of fiscal financing (Canzoneri, Cumby, and Diba 2001, Bohn 1998, Janssen, Nolan, and Thomas 2002). Canzoneri, Cumby, and Diba (CCD), for example, estimate a bivariate VAR with the government surplus and total liabilities 16 .…”

Section: Some Empirical Implicationsmentioning

confidence: 99%

Monetary and Fiscal Policy Switching

Chung¹,

Davig²,

Leeper³

2007

J of Money Credit Banking

107

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Abstract. A growing body of evidence finds that policy reaction functions vary substantially over different periods in the United States. This paper explores how moving to an environment in which monetary and fiscal regimes evolve according to a Markov process can change the impacts of policy shocks. In one regime monetary policy follows the Taylor principle and taxes rise strongly with debt; in another regime the Taylor principle fails to hold and taxes are exogenous. An example shows that a unique bounded non-Ricardian equilibrium exists in this environment.A computational model illustrates that because agents' decision rules embed the probability that policies will change in the future, monetary and tax shocks always produce wealth effects. When it is possible that fiscal policy will be unresponsive to debt at times, active monetary policy (like a Taylor rule) in one regime is not sufficient to insulate the economy against tax shocks in that regime and it can have the unintended consequence of amplifying and propagating the aggregate demand effects of tax shocks. The paper also considers the implications of policy switching for two empirical issues.

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Section: Some Empirical Implicationsmentioning

confidence: 99%

Monetary and Fiscal Policy Switching

Chung¹,

Davig²,

Leeper³

2007

J of Money Credit Banking

107

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“…debt monetization in Spain during 1874–1935. Janssen, Nolan, and Thomas () investigate how monetary and fiscal policy affects the time path of the UK price level. They find the price level has been closely related to the evolution of the base money supply.…”

Section: Literature Reviewmentioning

confidence: 99%

Monetary base and federal government debt in the long‐run: A non‐linear analysis

Ahmed

2019

Bulletin of Econ Res

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Government bonds are usually traded between the financial institutions and the Fed during the open market operations. These operations impact the bank reserves, subsequently influencing the monetary base. The monetary base and government bonds may portray a common trend and government debt could potentially bind the central bank to debt monetization. This paper, using monthly data on federal government debt and the monetary base from 1947:1 to 2018:10, investigates the presence of a long-run equilibrium relationship between the two variables and as to how the long-run equilibrium relationship vary in the short-run. Threshold cointegration tests find evidence of a long-run equilibrium relationship. Estimates of the threshold vector error-correction model find statistically significant evidence of contraction in the monetary base growth in the short-run in regime 1. In regime 2, the growth in the monetary base does not adjust to accommodate faster government debt growth. These estimates find no evidence of debt monetization or otherwise in either of the regimes in the United States. The Fed, by reducing the monetary base, perhaps focuses more on the inflation target. The findings also suggest a potential scenario where the Fed and the fiscal authority are not conjoined with each other in their operations.

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“…However, regional interest rates on government bonds are available over a brief period only and the spreads between regional interest rates are negligible. 25 We choose the federation's interest rate -a short-term 22 Tanner and Ramos (2003) for Brazil, Janssen, Nolan and Thomas (2002) for the UK and Thams (2007) for Germany and Spain. 23 Creel and Le Bihan, 2006; Bajo-Rubio, Diaz-Roldan and Esteve, 2009.…”

Section: A Test For Interaction Between Central Bank Federal Governmmentioning

confidence: 99%

“…Tanner and Ramos () for Brazil, Janssen, Nolan and Thomas () for the UK and Thams () for Germany and Spain.…”

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confidence: 99%

Interaction of Government Tiers and Central Banks in a Federation: An Empirical Test

2017

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Fiscal rules are necessary to protect monetary policy from the consequences of unsustainable or active fiscal policy for inflation. Monetary unions, such as the Economic and Monetary Union (EMU), require even stronger fiscal rules to avoid free riding by regional fiscal authorities on the common monetary policy. By contrast, in a fiscal federation, the federal government internalises the effect of active regional policies on the overall price level. Federal fiscal policy contributes to price stability either by enforcing fiscal rules or by adjusting its own stance. Following Canzoneri, Cumby and Diba (2001), we test whether federal and regional governments in Germany behave in an active or passive way. We find evidence of a spillover effect of unsustainable policies on other regions. The German federal government offsets the effect on the price level by running passive policies. The Bundesbank's prime objective of price stability is therefore endorsed by fiscal policy. The results have implications for the regulation of fiscal policies in the EMU.

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Money, Debt and Prices in the United Kingdom, 1705–1996

Cited by 18 publications

References 17 publications

Monetary and Fiscal Policy Switching

Monetary and Fiscal Policy Switching

Monetary base and federal government debt in the long‐run: A non‐linear analysis

Interaction of Government Tiers and Central Banks in a Federation: An Empirical Test

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