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Article: Research from A. Ferrero and co-authors reveals new findings on international economics.
- Article from:
- Economics Week
- Article date:
- March 13, 2009
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According to recent research published in the Journal of International Economics, "This paper addresses the optimal joint conduct of fiscal and monetary policy in a two-country model of a currency union with staggered price setting and distortionary taxes. A tractable linear-quadratic approximation permits a representation of the optimal policy plan in terms of targeting rules."
"In the optimal equilibrium, monetary policy should achieve aggregate price stability following a flexible inflation targeting rule. Fiscal policy should stabilize idiosyncratic shocks allowing for permanent variations of government debt but should abstain from creating inflationary ...