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Ms. Susan S. Yang and Ms. Nora Traum
A New Keynesian model allowing for an active monetary and passive fiscal policy (AMPF) regime and a passive monetary and active fiscal policy (PMAF) regime is fit to various U.S. samples from 1955 to 2007. Data in the pre-Volcker periods strongly prefer an AMPF regime, but the estimation is not very informative about whether the inflation coefficient in the interest rate rule exceeds one in pre-Volcker samples. Also, whether a government spending increase yields positive consumption in a PMAF regime depends on price stickiness. An income tax cut can yield a negative labor response if monetary policy aggressively stabilizes output.
Ms. Susan S. Yang and Ms. Nora Traum

) , and Davig and Leeper (2009) ). This paper estimates a New Keynesian model that accounts for monetary and fiscal policy interactions with Bayesian methods. Differing from most estimated New Keynesian models, our specification features government debt and fiscal financing, which is necessary to allow for the possibility of a PMAF regime. We estimate the model imposing an AMPF or a PMAF regime over three samples—1955Q1-1966Q4,1967Q1-1979Q2, and 1984Q1-2007Q4. For all the samples investigated, estimations are conducted under three specifications. The first two have

Huixin Bi, Ms. Wenyi Shen, and Susan Yang Shu-Chun
This paper studies the main channels through which interest rate normalization has fiscal implications in the United States. While unexpected inflation reduces the real value of government liabilities, a rising policy rate increases government financing needs because of higher interest payments and lower real bond prices. After an initial decline, the real government debt burden rises even with higher tax revenues in an expansion. Given the current net debt-to-GDP ratio at around 80 percent, interest rate normalization leads to a negligible increase in the sovereign default risk of the U.S. federal government, despite a much higher federal debt-to-GDP ratio than the post-war historical average.
International Monetary Fund. Research Dept.

in Reforming Plan to Market Tijdschrift voor Politieke Ekonomie Nadal-De Simone, Francisco Monetary and Fiscal Policy Interaction in a Small Open Economy: The Case of Singapore Asian Economic Journal Schwartz, Gerd; Ter-Minassian, Teresa The Distributional Effects of Public Expenditure Journal of Economic Surveys Senhadji, Abdelhak How Significant Are Departures from Certainty Equivalence?: Some Analytical and Empirical Results Review of Economic Dynamics Spilimbergo, Antonio Growth and Trade: The North Can Lose Journal of Economic Growth

International Monetary Fund

Public Debt 1. Introduction 2. Unpleasant monetarist arithmetic 3. Empirical results a. Monetary and fiscal policy interaction b. Reaction functions c. Money market and forward interest rates 4. Conclusion References

International Monetary Fund. Research Dept.

No. 10/241 On the Distributive Effects of Terms of Trade Shocks: The Role of Non-tradable Goods Galiani, Sebastian; Heymann, Daniel; Magud, Nicolas E. No. 10/242 Crisis and Recovery: Role of the Exchange Rate Regime in Emerging Market Countries Tsangarides, Charalambos G. No. 10/243 Monetary and Fiscal Policy Interactions in the Post-war U.S . Traum, Nora; Yang, Shu-Chun S. No. 10/244 After the Crisis: Assessing the Damage in Italy Morsy, Hanan; Sgherri, Silvia No. 10/245 A Historical Public Debt

International Monetary Fund. Asia and Pacific Dept

interactions and fiscal stimulus . European Economic Review , 55 ( 2 ), pp. 211 – 227 . Fialho , M.L. and Portugal , M.S. , 2005 . Monetary and fiscal policy interactions in Brazil: an application of the fiscal theory of the price level . Estudos Econômicos ( São Paulo ), 35 ( 4 ), pp. 657 – 685 . Gasper , V. , Obstfeld , M. and Rhee , C. , 2017 , June . Two to Tango – Inflation Management in Unusual Times . IMF Blog . Guerrieri , L. and Iacoviello , M. , 2015 . OccBin: A toolkit for solving dynamic models with occasionally

Mr. Alexei P Kireyev

B. M. Friedman and M. Woodford , 935 – 99 . San Diego : Elsevier . Dahan , M. 1988 . “ The Fiscal Effects of Monetary Policy. ” May 1998. IMF Working Paper 98/66 . International Monetary Fund , Washington . Daly , H. , and M. Smida . 2013 . “ Coordination of Monetary and Fiscal Policies: Theoretical Overview. ” Munich Personal RePEc Archive (MPRA) Paper No. 48066 . Fragetta , M. , and T. Kirsanova . 2010 . “ Strategic Monetary and Fiscal Policy Interactions: An Empirical Investigation. ” European Economic Review 54