A Comprehensive Comparison of Fiscal and Monetary Policies: A Comparative Dynamics Approach

Malcolm Sawyer () and Marco Veronese Passarella

Structural Change and Economic Dynamics, 2021, vol. 59, issue C, 384-404

Abstract: The purpose of the paper is to provide a comprehensive comparison of fiscal and monetary policies with different forms of public expenditure, including a job guarantee (JG) plan. Our key findings are as follows. First, expansionary fiscal policies (including JG) are effective in reflating the economy independently of the way in which they are funded. However, deficit monetization should be expected to be more effective in the short run, while bill-funded government spending is likely to be more effective in the long run. Second, expansionary monetary policies are reflationary in the short run. However, they may have deflationary effects on the economy in the medium to long run. Third, a lower reserve requirement can reflate the economy, but the expected impact is rather weak. Fourth, non-selective tax cuts are effective, but less effective than government spending. Fifth, the impact on the price level is harder to predict than the impact on output. Sixth, conventional spending outclasses JG in terms of GDP growth and inflation rate control, but the JG is a better option in terms of employment results and income distribution.

Keywords: Stock-Flow Consistent Models; Job Guarantee Plan; Fiscal Policy; Monetary Policy (search for similar items in EconPapers)
JEL-codes: B50 B52 E12 E16 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:59:y:2021:i:c:p:384-404

DOI: 10.1016/j.strueco.2021.08.009

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