Ricardian neutrality (fiscal multiplier) and fiscal dominance (reaction of monetary policy to fiscal policy)

If economic agents are rational, when there is (for example) a fiscal deficit, they expect a more restrictive fiscal policy in the future in order to restore fiscal solvency. This "Ricardian neutrality" behaviour leads to a low fiscal multiplier (an effect of a fiscal deficit on GDP growth), since a restrictive fiscal policy is expected each time an expansionary fiscal policy is implemented (symmetrically, an expansionary fiscal policy is expected when a restrictive fiscal policy is implemented). But this analysis of Ricardian neutrality fails to take into account the reaction of monetary policy to fiscal policy. If there is "fiscal dominance", it is monetary policy and not future fiscal policy that ensures fiscal solvency. The fiscal multiplier is then high, since if there is (for example) an increase in the fiscal deficit, it forces the central bank to conduct an expansionary monetary policy to maintain fiscal solvency. When fiscal policy becomes expansionary, economic agents expect monetary policy to become expansionary as well, leading to a high fiscal multiplier.