Fiscal inflation and cosmetic defaults in a small open economy

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dc.contributor.authorBianchi, Francesco
dc.date.accessioned2021-10-19T15:56:34Z
dc.date.available2021-10-19T15:56:34Z
dc.date.issued2021-10
dc.descriptionFor a small open economy, maintaining a stable exchange rate and moderate levels of inflation is often a goal of primary importance. At the same time, the profession has recognized the tight link between fiscal and monetary policies in determining inflation dynamics. Thus, the goal of a stable exchange rate requires a certain level of coordination between the monetary and fiscal authorities. This paper builds on recent advancements in the literature on monetary-fiscal policy interaction to formalize this idea. We study the origins of fiscal inflation, the possibility of stagflation as a result of policy uncertainty, and the role of default on sovereign debt crises that stem from lack of fiscal discipline. We then use the model to interpret the different periods of the Chilean economic history starting from the 1960s.es
dc.description.abstractFor a small open economy, maintaining a stable exchange rate and moderate levels of inflation is often a goal of primary importance. At the same time, the profession has recognized the tight link between fiscal and monetary policies in determining inflation dynamics. Thus, the goal of a stable exchange rate requires a certain level of coordination between the monetary and fiscal authorities. This paper builds on recent advancements in the literature on monetary-fiscal policy interaction to formalize this idea. We study the origins of fiscal inflation, the possibility of stagflation as a result of policy uncertainty, and the role of default on sovereign debt crises that stem from lack of fiscal discipline. We then use the model to interpret the different periods of the Chilean economic history starting from the 1960s.es
dc.format.pdf
dc.format.extentSección o Parte de un Documento
dc.format.mediump. 185-228
dc.identifier.isbn978-956-7421-69-5
dc.identifier.isbn978-956-7421-70-1 (pdf)
dc.identifier.issn0717-6686
dc.identifier.urihttps://hdl.handle.net/20.500.12580/6138
dc.language.isoenes
dc.publisherBanco Central de Chilees
dc.relation.ispartofseriesSeries on Central Banking Analysis and Economic Policies; no. 28
dc.relation.ispartofseriesSerie Banca Central, análisis y políticas económicas; no. 28
dc.rightsAttribution-NonCommercial-NoDerivs 3.0 Chile*
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/3.0/cl/*
dc.subjectINFLACIÓNes
dc.subjectTIPO DE CAMBIOes
dc.subjectPOLÍTICA MONETARIAes
dc.subjectPOLÍTICA FISCALes
dc.titleFiscal inflation and cosmetic defaults in a small open economyes
dc.type.docArtículo

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