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Monetary and fiscal policy in advanced and developing countries: An analysis before and after the financial crisis

Cleomar Gomes da Silva and Flavio Vieira ()

The Quarterly Review of Economics and Finance, 2017, vol. 63, issue C, 13-20

Abstract: The aim of this article is to evaluate the conduct of monetary and fiscal policies for a panel data of 113 advanced and emerging/developing economies, for the period prior to the beginning of the crisis (2001–2008) and for the period after the financial crisis (2009–2012). The results from the system GMM dynamic panel data models show that monetary policy seems to be countercyclical only for advanced economies in the period prior to the international financial crisis. Fiscal policy behaves in a procyclical way only in the pre-crisis period. In addition to that, interest rate smoothing seems to be an important tool in the conduct of monetary policy around the world. The estimations also show that monetary authorities in advanced economies stopped reacting to the output gap after the crisis, probably due to the zero lower bound on interest rates, switching to unconventional monetary policy measures. The estimations did not find any significant relationship between output gap and government spending, for the post-crisis period, implying no fiscal consolidation process after the crisis.

Keywords: Monetary policy; Fiscal policy; Panel data analysis (search for similar items in EconPapers)
JEL-codes: C33 E52 E62 E63 (search for similar items in EconPapers)
Date: 2017
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