The identification of fiscal and monetary policy in a structural VAR

Mardi Dungey () and Renee A. Fry ()

Economic Modelling, 2009, vol. 26, issue 6, pages 1147-1160

Abstract: Good economic management depends on understanding shocks from monetary policy, fiscal policy and other sources affecting the economy and their subsequent interactions. This paper presents a new methodology to disentangle such shocks in a structural VAR framework. The method combines identification via sign restrictions, cointegration and traditional exclusion restrictions within a system which explicitly models stationary and non-stationary variables and accounts for both permanent and temporary shocks. The usefulness of the approach is demonstrated on a small open economy where policy makers are actively considering the interaction between monetary and fiscal policies.

Keywords: Identification; Fiscal; policy; Monetary; policy; SVAR; Permanent; and; transitory; shocks; Sign; restrictions (search for similar items in EconPapers)
Date: 2009
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Related works:
Working Paper: THE IDENTIFICATION OF FISCAL AND MONETARY POLICY IN A STRUCTURAL VAR (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:eee:ecmode:v:26:y:2009:i:6:p:1147-1160

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