Riksbank paper evaluates inflation conservatism
A Sveriges Riksbank working paper, published today, says the desirability of inflation conservatism depends "crucially" on the timing of fiscal and monetary policy decisions.
In Distortionary Fiscal Policy and Monetary Policy Goals, Klaus Adam and Roberto Billi consider two policy regimes: one where fiscal and monetary authorities make policy decisions at the same time; and another where the fiscal authority acts first.
When the authorities act simultaneously, the authors find, full inflation
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