01806cas a2200265 a 4500 AALejournalIMF009671 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451868340 1018-5941 BD-DhAAL BD-DhAAL Kumhof, Michael. Simple Monetary Rules Under Fiscal Dominance / Michael Kumhof, Ricardo Nunes, Irina Yakadina. Washington, D.C. : International Monetary Fund, 2007. 1 online resource (25 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 Is aggressive monetary policy response to inflation feasible in countries that suffer from fiscal dominance? We find that if nominal interest rates are allowed to respond to government debt, even aggressive rules that satisfy the Taylor principle can produce unique equilibria. However, resulting inflation is extremely volatile and zero lower bound on nominal interest rates is frequently violated. Within the set of feasible rules the optimal response to inflation is highly negative, and more aggressive inflation fighting is inferior from a welfare point of view. The welfare gain from responding to fiscal variables is minimal compared to the gain from eliminating fiscal dominance. Mode of access: Internet Nunes, Ricardo. Yakadina, Irina. IMF Working Papers; Working Paper ; No. 2007/271 Full text available on IMF http://elibrary.imf.org/view/journals/001/2007/271/001.2007.issue-271-en.xml IMF e-Library