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- Title
Redistribution and the monetary‐fiscal policy mix.
- Authors
Bhattarai, Saroj; Lee, Jae Won; Yang, Choongryul
- Abstract
We show that the effectiveness of redistribution policy is tied to how much inflation it generates, and thereby to monetary‐fiscal adjustments that ultimately finance the transfers. In the monetary regime, taxes increase to finance transfers while in the fiscal regime, inflation rises, imposing inflation taxes on public debt holders. We show analytically that the fiscal regime generates larger and more persistent inflation than the monetary regime. In a two‐sector model, we quantify the effects of the CARES Act in a COVID recession. We find that transfer multipliers are larger, and that moreover, redistribution is Pareto improving, under the fiscal regime.
- Subjects
CORONAVIRUS Aid, Relief &; Economic Security Act (U.S.); PUBLIC debts; COVID-19 treatment; FISCAL policy
- Publication
Quantitative Economics, 2023, Vol 14, Issue 3, p817
- ISSN
1759-7323
- Publication type
Article
- DOI
10.3982/QE2030