Eric Leeper on the Interactions of Fiscal and Monetary Policy
Macro Musings with David Beckworth
00:00
Fiscal Dominance and Monetary Dominance
Fiscal dominance is where the central bank targets inflation and does whatever it needs to do. Monetary dominance, on the other hand, sees fiscal policy in the background supporting those objectives. The Fed's job under monetary dominance is to insure that debt doesn't blow up. And one way it can do that is by pegging the nominal interest rate so that debt service doesn't accumulate too quickly.
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