Zero Inflation Targets: Central Bank Commitment and Fiscal Policy Outcomes.
by
Peter J. Stemp and William M. Scarth.
July 1996
Department of Economics. University of Melbourne. Parkville Victoria
3052 Australia
ABSTRACT
This paper considers a central bank with a zero inflation target and
a fiscal authority with a differing objective. Examples using calibrated
models explore the consequences of the fiscal authority being aware of
the central bank's objective. Situations in which the fiscal authority
is able to exploit the central bank's commitment to zero inflation are
examined.
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