Relative Effectiveness of Monetary and Fiscal Policies on Output Growth in Bangladesh: A VAR Approach

Md. Habibur Rahman

Working Papers from eSocialSciences

Abstract: This paper investigates the relative importance of monetary and fiscal policies in altering real output of Bangladesh. An unrestricted vector auto regression (VAR) framework based on the St. Louis equations, is used to compute variance decompositions (VDCs)and impulse response function (IRF) through 1000 Monte Carlo Simulations. A 'Monetary— Fiscal Game' under oligopolistic framework is also used to justify the co-ordination and co-operation between the monetary and fiscal authorities. The outcomes of this study imply that monetary policy is relatively more effective than fiscal policy in stimulating real economic activity. The results also confirm the presence of interactions between monetary and fiscal policies. [BB WP no.0601]

Keywords: monetary policy; fiscal policy; Bangladesh; vector auto regression (VAR); variance decompositions (VDCs); impulse response function (IRF); Monetary— Fiscal Game; St. Louis equations. (search for similar items in EconPapers)
Date: 2009-06
New Economics Papers: this item is included in nep-cwa, nep-mac and nep-mon
Note: Institutional Papers
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Citations: View citations in EconPapers (1)

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