From 8c53ec89cbb2e5fb43ee6e820d8d323d5e03aef2 Mon Sep 17 00:00:00 2001 From: thomassargent30 Date: Thu, 11 Apr 2024 13:27:09 -0400 Subject: [PATCH] Tom's April 11 edits of unpleasant arithmetic --- lectures/unpleasant.md | 9 +++++++-- 1 file changed, 7 insertions(+), 2 deletions(-) diff --git a/lectures/unpleasant.md b/lectures/unpleasant.md index d78b48ff..3e57c1bf 100644 --- a/lectures/unpleasant.md +++ b/lectures/unpleasant.md @@ -148,9 +148,14 @@ $$ $$ (eq:overlineg) We want to compute an equilibrium $\{p_t,m_t,b_t, R_t\}_{t=0}$ sequence under this scheme for -running monetary-fiscal policy. +running monetary and fiscal policies. -**TOM: add definitions of monetary and fiscal policy and coordination here.** +Here, by **fiscal policy** we mean the collection of actions that determine a sequence of net-of-interest government deficits $\{g_t\}_{t=0}^\infty$ that must be financed by issuing to the public either money or interest bearing bonds. + +By **monetary policy** or **debt-management polcy**, we mean the collection of actions that determine how the government divides its portolio of debts to the public between interest-bearing parts (government bonds) and non-interest-bearing parts (money). + +By an **open market operation**, we mean a government monetary policy action in which the government +(or its delegate, say, a central bank) either buys government bonds from the public for newly issued money, or sells bonds to the public and withdraws the money it receives from public circulation. ## Algorithm (basic idea)