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The effects of fiscal spending shocks on the performance of simple monetary policy rules

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  • Malik, Ali K.

Abstract

We examine the effects of fiscal shocks on the performance of alternative monetary policy rules in a small dynamic general equilibrium framework. We explicitly consider the interaction between fiscal and monetary policy rules which may be present in the real world. We use a simple specification for the fiscal policy rule and various specifications for the (simple) monetary policy rule. Our analysis suggests that some form of flexible inflation targeting regime would perform well in response to fiscal shocks compared to other forms of policy regimes.

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  • Malik, Ali K., 2013. "The effects of fiscal spending shocks on the performance of simple monetary policy rules," Economic Modelling, Elsevier, vol. 30(C), pages 643-662.
    • Handle: RePEc:eee:ecmode:v:30:y:2013:i:c:p:643-662
    DOI: 10.1016/j.econmod.2012.08.027
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    Cited by:

    1. Nkrumah, Kwabena Meneabe, 2013. "Effect of Fiscal Policy Shocks in Brazil," MPRA Paper 72534, University Library of Munich, Germany.
    2. Thomas Ziesemer & Anne von Gässler, 2021. "Ageing, human capital and demographic dividends with endogenous growth, labour supply and foreign capital," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 20(2), pages 129-160, May.
    3. Cavalcanti, Marco A.F.H. & Vereda, Luciano & Doctors, Rebeca de B. & Lima, Felipe C. & Maynard, Lucas, 2018. "The macroeconomic effects of monetary policy shocks under fiscal rules constrained by public debt sustainability," Economic Modelling, Elsevier, vol. 71(C), pages 184-201.
    4. Takyi, Paul Owusu & Leon-Gonzalez, Roberto, 2020. "Macroeconomic impact of fiscal policy in Ghana: Analysis of an estimated DSGE model with financial exclusion," Economic Analysis and Policy, Elsevier, vol. 67(C), pages 239-260.
    5. Shvets, Serhii, 2020. "The golden rule of public finance under active monetary stance: endogenous setting for a developing economy," MPRA Paper 101232, University Library of Munich, Germany.
    6. Nkrumah, Kwabena Meneabe, 2013. "Effect of Fiscal Policy Shocks in Brazil," MPRA Paper 85432, University Library of Munich, Germany.

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    More about this item

    Keywords

    Fiscal policy; Monetary policy; Inflation targeting; Impulse response analysis; Macroeconomic variables;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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