01770cas a2200253 a 4500 AALejournalIMF006189 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451874310 1018-5941 BD-DhAAL BD-DhAAL Kumhof, Michael. Jointly Optimal Monetary and Fiscal Policy Rules under Borrowing Constraints / Michael Kumhof, Huixin Bi. Washington, D.C. : International Monetary Fund, 2009. 1 online resource (39 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students We study the welfare properties of an economy where both monetary and fiscal policy follow simple rules, and where a subset of agents is borrowing constrained. The optimized fiscal rule is far more aggressive than automatic stabilizers, and stabilizes the income of borrowingconstrained agents, rather than output. The optimized monetary rule features super-inertia and a very low coefficient on inflation, which minimizes real wage volatility. The welfare gains of optimizing the fiscal rule are far larger than the welfare gains of optimizing the monetary rule. The preferred fiscal instruments are government spending and transfers targeted to borrowing-constrained agents. Mode of access: Internet Bi, Huixin. IMF Working Papers; Working Paper ; No. 2009/286 Full text available on IMF http://elibrary.imf.org/view/journals/001/2009/286/001.2009.issue-286-en.xml IMF e-Library