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Preprints, Working Papers, ... Year : 2018

Fiscal and Monetary Regimes: A Strategic Approach

Jean Barthélemy
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Guillaume Plantin


This paper develops a full-fledged strategic analysis of Wallace’s “game of chicken”. A public sector facing legacy nominal liabilities is comprised of fiscal and monetary authorities that respectively set the primary surplus and the price level in a non-cooperative fashion. We find that the post 2008 feature of indefinitely postponed fiscal consolidation and rapid expansion of the Federal Reserve’s balance sheet is consistent with a strategic setting in which neither authority can commit to a policy beyond its current mandate, and the fiscal authority has more bargaining power than the monetary one at each date.
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hal-03393134 , version 1 (21-10-2021)



Jean Barthélemy, Guillaume Plantin. Fiscal and Monetary Regimes: A Strategic Approach. 2018. ⟨hal-03393134⟩
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