چکیده:
In developing countries, weak institutional quality can increase the probability of applying discretionary policies and can have a great impact on their double-digit inflation. Surico (2008) calculated inflation bias, but he considered just monetary policy and he did not pay attention to the institutions. Therefore, we design a model which considers the discretion in monetary and fiscal policies and the effect of the institutional quality. Then we calculate the inflation bias resulting from time inconsistency of monetary and fiscal policies by solving our model.
In fact, we used a Barro- Gordon type model for our purpose. After solving the model, sensitivity analysis is done. The experimental results of the model, for Iran’s economy as a developing country, show high degree of inflation bias during 1991-2016 , furthermore, the weak institutional quality have positive effects on inflation bias.
خلاصه ماشینی:
"Inflation Bias, Time Inconsistency of Monetary and Fiscal Policies and Institutional Quality Ali Hussein Samadi1 Hussein Marzban2 Sakine Owjimehr3 Abstract: In developing countries, weak institutional quality can increase the probability of applying discretionary policies and can have a great impact on their double-digit inflation.
Then we calculate the inflation bias resulting from time inconsistency of monetary and fiscal policies by solving our model.
Therefore, this paper will apply Barro-Gordon type approach to calculate the inflation bias of time inconsistency of the monetary and fiscal policies.
3- The Model In the present study, the framework of Barro-Gordon has been applied to calculate the inflation bias of time inconsistency of monetary and fiscal policies.
Sensitivity Analysis of Inflation Bias with Respect to the Bargaining Coefficient -3 x 10 Source: Research finding In conditions of active fiscal policy and passive monetary policy, when taxes do not meet the government expenses, the seigniorage should establish government budget constraint.
Sensitivity Analysis of Inflation Bias Respect to Marginal Benefit of the Expansionary Fiscal policy Source: Research finding 5- Concluding Remarks Although economists have mentioned various determinants of inflation in developing countries with weak institutional quality, but the discussion of discretionary policies has less often attracted their attention.
On the one hand, given that the institutional conditions in developing countries have certainly a great effect on the inflation bias, therefore, in this study with the use of a general loss function that has both monetary and fiscal policies at the same time, two indicators of good governance in the model, have thus been defined."