 Fiscal and monetary policy regimes: New evidence from IndiaParas Sachdeva and Wasim Ahmad Economic Modelling, 2024, vol. 139, issue C Abstract: The paper examines how fiscal and monetary policy coordination in India stabilizes macroeconomic fundamentals. We consider two coordinating fiscal and monetary policy regimes, the “Indian Fiscal” (IF) and M regime and then examine the transmission of public expenditure (PE) shock across these regimes. Monetary policy in the IFregime supports fiscal policy in debt stabilization by reducing interest rates. The M regime fiscal policy supports monetary policy in curbing inflation through fiscal consolidation drives. The IF regime is more conducive to the Indian economy as PE stimulus accelerates economic activity without causing high inflationary and high debt scenarios. In contrast, the M regime has a crowding out effect on PE stimulus while worsening the government's fiscal space. The findings indicate that in the Indian case, the monetary authority should maintain its accommodative stance on PE stimulus. Keywords: Fiscal dominance; Fiscal multiplier; Monetary–fiscal policy mix; Emerging market economy; Debt rollover (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:139:y:2024:i:c:s0264999324001950 DOI: 10.1016/j.econmod.2024.106838 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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