NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Optimal Monetary Growth with Accomodating Fiscal Policy in a Small Open Economy

Stephen J. Turnovsky

NBER Working Paper No. 2084 (Also Reprint No. r0923)
Issued in October 1987
NBER Program(s):   ITI   IFM

This paper emphasizes how the choice of the optimal monetary growth rate in a small open economy under perfect capital mobility depends upon the accommodating policy chosen to maintain the overall budget constraint in the economy. When this occurs through lump sum taxation, the optimal monetary growth rate is shown to be the "distorted" Friedman monetary rule. If the adjustment occurs through the income tax rate, the optimal monetary growth rate involves a Phelps-type tradeoff between the income tax rate and the inflation tax rate. The framework is suited for analyzing optimal macroeconomic policy in general and the latter part of the paper considers an optimal monetary-fiscal package.

download in pdf format
   (216 K)

email paper

This paper is available as PDF (216 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w2084

Published: Turnovsky, Stephen J. "Optimal Monetary Growth with Accomodating Fiscal Policy in a Small Open Economy," Journal of International Money and Finance, Vol. 6, No. 2, June 1987, pp. 179-193. citation courtesy of

Users who downloaded this paper also downloaded these:
Turnovsky w2133 Monetary Growth, Inflation, and Economic Activity in a Dynamic Macro Model
Eaton and Turnovsky w1138 The Forward Exchange Market, Speculation, and Exchange Market Intervention
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us