期刊名称：Discussion Paper Series / Department of Economics, New York University
出版年度：2006
卷号：1
出版社：New York University
摘要：Flexible in°ation targeting has been advocated as a practical approach to
the implementation of an optimal state-contingent monetary policy, but theo-
retical expositions reaching this conclusion have typically abstracted from the
¯scal consequences of monetary policy. Here we extend the standard theory
by considering the character of optimal monetary policy under a variety of as-
sumptions about the ¯scal regime, with the standard analysis appearing only
as a special case in which non-distorting sources of government revenue exist,
and ¯scal policy can be relied upon to adjust so as to ensure intertemporal
government solvency. Alternative cases treated in this paper assume that there
exist only distorting sources of government revenue; that it may not be possible
for tax rates to adjust in response to economic disturbances, except with delay;
or even that ¯scal policy is purely exogenous, so that the central bank cannot
rely upon ¯scal policy to adjust in order to maintain intertemporal solvency (a
case emphasized in the critique of in°ation targeting by Sims, 2005).
We ¯nd that the ¯scal policy regime has important consequences for the
optimal conduct of monetary policy, but that a suitably modi¯ed form of in-
°ation targeting will still represent a useful approach to the implementation of
optimal policy. We derive an optimal targeting rule for monetary policy that
applies to all of the ¯scal regimes considered in this paper, and show that it in-
volves commitment to an explicit target for an output-gap adjusted price level.
The optimal policy will allow temporary departures from the long-run target
rate of growth in the gap-adjusted price level in response to disturbances that
a®ect the government's budget, but it will also involve a commitment to rapidly
restore the projected growth rate of this variable to its normal level following
such disturbances, so that medium-term in°ation expectations should remain
¯rmly anchored despite the occurrence of ¯scal shocks.
Since its adoption in Chile and elsewhere early in the 1990s, in°ation targeting
has become an increasingly popular approach to the the conduct of monetary policy
worldwide. Most of the countries that have adopted in°ation targeting judge the
experiment favorably, at least thus far. In many countries the adoption of in°ation
targeting has been associated with reductions in both the average level and volatility
of in°ation. In°ation targeting has been especially successful in stabilizing in°ation
expectations,1 as one might expect, given the emphasis that is typically given to a
clear medium-term commitment regarding in°ation (while temporary departures from
the in°ation target are allowed), and the typical increase in the degree of commu-
nication by in°ation-targeting central banks with regard to the outlook for in°ation
over the next few years.
But is in°ation targeting an approach to monetary policy that is equally suitable
for all countries, regardless of the institutions that may exist in a given country, the
disturbances to which a particular economy is subject, and the other policies that
are pursued by that country's government? A question that would seem particulary
worthy of discussion is how a country's ¯scal policies might a®ect the suitability of
in°ation targeting as an approach to the conduct of monetary policy.
The ¯scal consequences of commitment to an in°ation target have largely been
neglected in the theoretical literature that develops the case for in°ation targeting.2
Typically, the models used to analyze monetary stabilization policy abstract from the
government's budget and dynamics of the public debt altogether, so that any ¯scal
e®ects of monetary policy decisions are tacitly assumed to be irrelevant. And it may
be an acceptable simpli¯cation to proceed in this way, if one is choosing a policy for an
economy with sound government ¯nances, by which we mean one for which relatively
non-distorting sources of revenue exist and the political will to maintain government
solvency need never be doubted. But countries di®er in the degree to which such an
idealization of the circumstances of ¯scal policy is realistic; and especially as in°ation
targeting becomes popular in developing countries which have recently had serious
problems with in°ation exactly because of their precarious government ¯nances, one
may wonder how safe it is to ignore the interrelation between monetary and ¯scal
policy choices.
Indeed, a number of authors have suggested that the appropriateness of in°ation
targeting as a policy recommendation may depend critically on the nature of ¯scal
policy. For example, Fraga et al. (2003), in the context of a discussion of in°ation
targeting for developing countries, remark that \the success of in°ation targeting
... requires the absence of ¯scal dominance" (p. 383), and go on to stress that it
is not only necessary that ¯scal policy be sound in this respect, but also necessary
that it be credible that it will continue to be. Their intent is not to suggest that
in°ation targeting not be adopted by developing countries, but rather to emphasize
the importance of enacting credible ¯scal reforms as well; but their insistence on
the need for ¯scal commitments that are not obviously present in many developing
countries raises the question whether in°ation targeting is not ill-advised in such
countries.
Sims (2005) enunciates exactly this view. He argues that some countries' ¯scal
policies may make achievement of a target rate of in°ation by the central bank im-
possible, in the sense that there exists no possible rational-expectations equilibrium
in which the target is ful¯lled, regardless of the conduct of monetary policy. He fur-
thermore asserts that in such a case, attempting to target in°ation may be not only
doomed to frustration, but harmful, in that it leads to less stability (even less stabil-
ity of the in°ation rate) than could have been achieved through other policies. His
essential argument is that if the ¯scal regime ensures that primary budget surpluses
are not (su±ciently) increased in response to a monetary tightening, then a policy
intended to contain in°ation | raising nominal interest rates sharply when in°ation
rises above the in°ation target | may cause an explosion of the public debt, which
ultimately requires even larger price increases than would have been necessary had
the debt not grown. Examples of models in which \orthodox" monetary policies of
this kind lead to explosive debt dynamics have been presented by Loyo (1999) and
Blanchard (2005).
Our goal here is to analyze the character of an optimal monetary policy com-
mitment under alternative assumptions about the character of ¯scal policy, in order
to determine to what extent an optimal policy will be similar to in°ation targeting,
and in particular to see to what extent the form of an optimal monetary policy rule
depends on the nature of ¯scal policy. In order to address these issues, we extend
the framework used to analyze optimal monetary stabilization policy in Benigno and
Woodford (2005), to explicitly model debt dynamics and the conditions required for intertemporal government solvency, and also to treat the e®ects of tax distortions. We
consider a variety of assumptions regarding the character of ¯scal policy, including
the kind of ¯scal regime | under which there is no adjustment of the real primary
budget surplus in order to prevent explosion of the public debt as a result of an in-
crease in interest rates | that is at the heart of the Loyo and Blanchard examples of
possible perverse e®ects of tight-money policies.
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