Disinflation, External Vulnerability, and Fiscal Intransigence : some unpleasant Mundellian arithmetic /

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Bibliographic Details
Author / Creator:	Tanner, Evan C., author.
Imprint:	Washington, D.C. : International Monetary Fund, 2017.
Description:	1 online resource (35 pages)
Language:	English
Series:	IMF working paper, 1018-5941 ; WP/17/118 IMF working paper ; WP/17/118.
Subject:	Mundell, Robert A. Mundell, Robert A. Economic development -- Mathematical models. Economic policy -- Mathematical models. Monetary policy -- Mathematical models. Fiscal policy -- Mathematical models. Macroeconomics -- Mathematical models. Capitalism -- Mathematical models. Capitalism -- Mathematical models. Economic development -- Mathematical models. Economic policy -- Mathematical models. Fiscal policy -- Mathematical models. Macroeconomics -- Mathematical models. Monetary policy -- Mathematical models.
Format:	E-Resource Book
URL for this record:	http://pi.lib.uchicago.edu/1001/cat/bib/11705361

Hidden Bibliographic Details
ISBN:	9781484301203 148430120X 1484300645 9781484300640
Notes:	Includes bibliographical references and index. Print version record.
Summary:	This paper examines the policy challenges a country faces when it wants to both reduce inflation and maintain a sustainable external position. Mundell's (1962) policy assignment framework suggests that these two goals may be mutually incompatible unless monetary and fiscal policies are properly coordinated. Unfortunately, if the fiscal authority is unwilling to cooperate-a case of fiscal intransigence-central banks that pursue a disinflation on a 'go it alone' basis will cause the country's external position to further deteriorate. A dynamic analysis shows that if the central bank itself lacks credibility in its inflation goal, it must rely even more on cooperation from the fiscal authority than otherwise. Echoing Sargent and Wallace's (1981) 'unpleasant monetarist arithmetic, ' in these circumstances, a 'go it alone' policy may successfully stabilize prices and output, but only on a short-term basis.
Other form:	Print version: Tanner, Evan C. Disinflation, External Vulnerability, and Fiscal Intransigence. Washington, D.C. : International Monetary Fund, ©2017 9781484300640
Standard no.:	10.5089/9781484300640.001

Table of Contents:

Cover; Table of Contents; ABSTRACT; I. INTRODUCTION; II. A STATIC OPEN ECONOMY MACROECONOMIC MODEL; A. Net Exports and Inflation-Reduced Form Equations; III. ECONOMIC STABILIZATION: ELIMINATING EXTERNAL AND INTERNAL IMBALANCES; A. Graphical Treatment in the Spirit of Mundell (1962); B. The Perils of Fiscal Intransigence; C. Some Illustrative Examples (EML holds); D. Coordination versus Fiscal Intransigence if the EML Fails; IV. DISINFLATION, THE EXTERNAL POSITION, AND CREDIBILITY: A DYNAMIC ANALYSIS; A. The Toxic Mix Again: High Inflation, External Deficits, and Low Credibility.
v. SUMMARY AND CONCLUSIONSVI. REFERENCES; VII. APPENDIX; A. Translating Percent of Potential Output into Currency Units; B. Model Parameters; FIGURES; 1: The Expanded Marshall-Lerner (EML) Condition; 2: Required Adjustments to Attain Internal Balance (?*=?); 3: Required Adjustments to Attain External Balance (nx*=nx); 4: Required Adjustments for Joint Stabilization
EML holds; 5: Required Adjustments for Joint Stabilization
EML fails; 6: External Debt (Percent of GDP); 7: Real Interest Rate (Domestic, in Percent); 8: Fiscal Adjustment (% of GDP; 9: Real Exchange Rate (Appreciation +).
10: Risk Premium (in Percent)11: Output Gap (in percent); TABLES; 1: External Vulnerability and Inflation: Selected Emerging Market Countries; 2: Adjustments Required for External and Internal Stabilization.

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