Abstract

GALVIS, Juan; BEDOYA, Juan  and  LOAIZA, Ruben. An Optimal Fiscal Policy Rule for the Colombian Economy: A Dynamic Stochastic General Equilibrium Approach. Lect. Econ. [online]. 2011, n.75, pp.107-141. ISSN 0120-2596.

This paper seeks to develop an optimal fiscal policy rule for the Colombian economy that interacts with the monetary policy in order to stabilize the product and inflation gap. It proposes a Dynamic Stochastic General Equilibrium model (DSGE) with nominal rigidities and proposes a fiscal rule that depends on the debt and product gap, with the objective of isolating external shocks for the public spending gap in this case a preference shock keeping the economy away from the steady-state.

Keywords : Dynamic Stochastic General Equilibrium; fiscal policy; monetary policy; business cycles.

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