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

Ali K. Malik

Economic Modelling, 2013, vol. 30, issue C, 643-662

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.

Keywords: Fiscal policy; Monetary policy; Inflation targeting; Impulse response analysis; Macroeconomic variables (search for similar items in EconPapers)
JEL-codes: E50 E52 E58 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:30:y:2013:i:c:p:643-662

DOI: 10.1016/j.econmod.2012.08.027

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