Phase-Dependent Monetary and Fiscal Policy

Hayk Kamalyan

MPRA Paper from University Library of Munich, Germany

Abstract: This paper studies how the effects of monetary and fiscal policy vary depending on the business cycle phase. It shows that in a medium-scale DSGE model, estimated on US data, monetary policy has a stronger impact on the economy in downturns and booms. Labor and capital income taxes display similar patterns. Government expenditure shocks and consumption tax shocks, on the contrary, have a stronger impact on output in depressions and recoveries. The paper also shows that accounting for the source of business cycle fluctuations is potentially important when assessing state-dependence in policy transmission.

Keywords: business cycle phases; phase-dependent policy; monetary policy; fiscal policy (search for similar items in EconPapers)
JEL-codes: E31 E32 E37 E52 E62 (search for similar items in EconPapers)
Date: 2021-10-24
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:110341

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