Working Paper: NBER ID: w15269
Authors: Eric M. Leeper
Abstract: In this lecture, I argue that there are remarkable parallels between how monetary and fiscal policies operate on the macro economy and that these parallels are sufficient to lead us to think about transforming fiscal policy and fiscal institutions as many countries have transformed monetary policy and monetary institutions. Making fiscal transparency comparable to monetary transparency requires fiscal authorities to discuss future possible fiscal policies explicitly. Enhanced fiscal transparency can help anchor expectations of fiscal policy and make fiscal actions more predictable and effective. As advanced economies move into a prolonged period of heightened fiscal activity, anchoring fiscal expectations will become an increasingly important aspect of macroeconomic policy.
Keywords: monetary policy; fiscal policy; transparency; sustainability; interactions
JEL Codes: E52; E63; H60
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Fiscal Transparency (H69) | Anchoring of Fiscal Expectations (H68) |
| Anchoring of Fiscal Expectations (H68) | Predictability of Fiscal Actions (E62) |
| Predictability of Fiscal Actions (E62) | Effectiveness of Fiscal Policy (E62) |
| Fiscal Transparency (H69) | Effectiveness of Fiscal Policy (E62) |
| Lack of Transparency in Fiscal Policy (E62) | Disconnect Between Public Expectations and Actual Policy Outcomes (D78) |
| Disconnect Between Public Expectations and Actual Policy Outcomes (D78) | Undermining of Effectiveness of Fiscal Policy (E62) |