Here. Keeping fiscal and monetary policy straight is harder than you'd think, and it has big implications for how we talk about things.
So too - as Gene has pointed out - for within fiscal policy. One ought to distinguish between the impacts of a debt burden and a tax. Grant McDermott pointed this out to, noting that the reason why perpetually rolling over the debt didn't work is because Bob was not perpetually rolling over the debt (did they ever respond do you on this Grant?).
I find the "this is monetary policy and this is fiscal policy" discussion more broadly as a little too convenient sometimes.
Take the way people talk about monetary policy reaction functions. These reaction functions really became important in modeling at a time when central banks were starting to get very well behaved and transparent. And to be fair, there's a good reason to have those reaction functions in there, because central bankers do react with some degree of predictability and they do it for the reasons these models suggest: they have their own objective function that they're optimizing.
The trouble comes in when we interpret what all that means.
Often a fiscal stimulus smacked down by the central bank is said to have a zero multiplier.
This has always struck me as odd. They're all policymakers. In fact the people that make fiscal policy appoint the people that make monetary policy.
So what's really going on is that the effect of monetary policy is positive and the fiscal multiplier is positive but we have some reason to think that the monetary authority will use its powers counter-productively.
That's a very different claim from the claim that the fiscal multiplier is zero!!! And it completely comes out of the definitions. An exogenous monetary policymakers' decision to counteract fiscal policy puts the economy in a worse situation than it would have been. That doesn't tell you anything about the technical efficacy of fiscal policy. It tells you about the consequences of central bankers with certain objetive functions.
4 hours ago