Should central banks like the Federal Reserve consider and adapt to fiscal policy – directly, indirectly, preemptively, or belatedly?

1. Heterogeneous-Agent New Keynesian (HANK) advanced models
2. Large fiscal deficits in unstable economies (Turkey '90s/'00s; Mexico '94; Russia '98; Brazil '99; Argentina '01)
3. Large fiscal deficits in stable economies (wealth effect vs inflation expectations vs monetary counterbalance)
4. Central bank response impacts (preemptive vs coincident vs lagging)
5. Loose fiscal vs tight monetary policy (Reagan/Volcker '80s)
6. Central bank independence vs fiscal reaction function

This podcast is Al-generated with NotebookLM, using the following sources, research, and analysis:

• Difficulties in Modeling Interest Rates (Fray, 2008.12)
• Economics-Watching: Neutral Interest Rates and the Monetary Policy Stance (Horn/Zaman, 2025.09)
• The Effect of Monetary Policy Assumptions on Fiscal and Macroeconomic Analysis (Tedeschi/Ricco, 2024.07)
• Fed Delivers Dovish Shift, Restarts Rate-Cutting Cycle (PIMCO, 2025.09)
• Fiscal policy and inflation expectations (Mello, 2021.03)

• Inflation Scares and Forecast-Based Monetary Policy (Williams, 2003.07)
• Interaction of Monetary and Fiscal Policies: Why Central Bankers Worry About Government Budgets (Hilbers, 2005.01)
• International Macroeconomics: From the Great Financial Crisis to COVID-19, and Beyond (Gourinchas, 2022.08)
• Interview: The Yellen View (Yellen, 2005)
• Measuring the Natural Rate of Interest (NY Fed)
• Monetary-Fiscal Policy Interactions for Central Bankers (Leeper, 2023.02)
• Navigating by Falling Stars: Monetary Policy with Fiscally Driven Natural Rates (Campos/Fernandez-Villaverde/Nuño/Paz, (2025.06)
• New Evidence on the Interest Rate Effects of Budget Deficits and Debt (Laubach, 2003.12)
• A Taylor Rule for Fiscal Policy (Kendricka/Ammanb, 2011.01)
• Underlying Trends in the U.S. Neutral Interest Rate (Carvalho/Ferrero/Mazin/Nechio, 2025.04)

• What is the difference between monetary policy and fiscal policy, and how are they related? (Federal Reserve FAQs, 2024.07)

# economics econometrics r* r-star equilibrium policy rates Taylor Rule Laubach-Williams (LW) Holston-Laubach-Williams (HLW) Zaman Model Vasicek Interest Rate Model