{
  "title": "Monetary and Fiscal Policy Interactions in the Post-war U.S",
  "publication": "IMF Working Papers, November 1, 2010",
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  "summary": "A New Keynesian model allowing for an active monetary and passive fiscal policy (AMPF) regime and a passive monetary and active fiscal policy (PMAF) regime is fit to various U.S. samples from 1955 to 2007.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- A New Keynesian model that permits two regimes — active monetary and passive fiscal policy (AMPF) and passive monetary and active fiscal policy (PMAF) — is fit to various U.S. samples from 1955 to 2007.\n- Data in the pre-Volcker periods strongly prefer an AMPF regime.\n- The estimation for pre-Volcker samples is not very informative about whether the inflation coefficient in the interest rate rule exceeds one.\n- Whether a government spending increase yields positive consumption in a PMAF regime depends on price stickiness.\n- An income tax cut can yield a negative labor response if monetary policy aggressively stabilizes output."
    },
    {
      "heading": "Model, Regimes, and Empirical Scope",
      "content": "- Model framework: New Keynesian model allowing for regime switches between AMPF and PMAF.\n- Sample period: 1955 to 2007.\n- Regimes defined:\n  - AMPF: active monetary policy, passive fiscal policy.\n  - PMAF: passive monetary policy, active fiscal policy."
    },
    {
      "heading": "Key Findings and Results",
      "content": "- Pre-Volcker data strongly prefer the AMPF regime.\n- Estimation is inconclusive about whether the inflation coefficient in the interest rate rule exceeds one in pre-Volcker samples.\n- Government spending increases under PMAF:\n  - The sign of the consumption response depends on price stickiness.\n- Income tax cuts:\n  - Can produce a negative labor response when monetary policy aggressively stabilizes output."
    },
    {
      "heading": "Policy-Relevant Implications",
      "content": "- Interaction of fiscal and monetary regimes matters for macroeconomic transmission:\n  - The effectiveness and sign of fiscal multipliers (e.g., government spending on consumption) depend on the monetary-fiscal regime and microfoundations such as price stickiness.\n  - Monetary policy behavior (degree of output stabilization) can alter labor supply responses to fiscal measures like income tax cuts.\n- Identification of regime (AMPF vs PMAF) is crucial when evaluating fiscal policy effects in historical samples.\n\n---\n\n Content in this bundle\n\n- wp10243\n  - wp10243 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp10243 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/monetary-and-fiscal-policy-interactions-in-the-post-war-u-24322"
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    "Authors: Susan S. Yang, Nora Traum",
    "Published: November 1, 2010",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781455209439.001",
    "A New Keynesian model that permits two regimes — active monetary and passive fiscal policy (AMPF) and passive monetary and active fiscal policy (PMAF) — is fit to various U.S. samples from 1955 to 2007.",
    "Data in the pre-Volcker periods strongly prefer an AMPF regime.",
    "The estimation for pre-Volcker samples is not very informative about whether the inflation coefficient in the interest rate rule exceeds one.",
    "Whether a government spending increase yields positive consumption in a PMAF regime depends on price stickiness.",
    "An income tax cut can yield a negative labor response if monetary policy aggressively stabilizes output.",
    "Model framework: New Keynesian model allowing for regime switches between AMPF and PMAF.",
    "Sample period: 1955 to 2007.",
    "Regimes defined:",
    "Pre-Volcker data strongly prefer the AMPF regime.",
    "Estimation is inconclusive about whether the inflation coefficient in the interest rate rule exceeds one in pre-Volcker samples.",
    "Government spending increases under PMAF:",
    "Income tax cuts:",
    "Interaction of fiscal and monetary regimes matters for macroeconomic transmission:",
    "Identification of regime (AMPF vs PMAF) is crucial when evaluating fiscal policy effects in historical samples.",
    "**_wp10243**"
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