Money Quantity and Optimal Monetary and Fiscal Policy: A Quantitative Analysis
Xuan Liu
Front. Econ. China ›› 2012, Vol. 7 ›› Issue (2) : 263 -285.
Money Quantity and Optimal Monetary and Fiscal Policy: A Quantitative Analysis
This paper quantitatively analyzes the impact of money stock on optimal monetary and fiscal policy in a stochastic production economy with sticky prices. The numerical results indicate that a sufficient large quantity of money makes a noticeable difference in many aspects of optimal monetary and fiscal policy. They suggest that the volatile inflation in China may not be as bad as the existing theory would have implied if its large amount of money is taken into consideration.
optimal fiscal and monetary policy / money stock / sticky prices
Higher Education Press and Brill
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