Macroeconomic Fluctuations in the United States: The Role of Monetary and Fiscal Policy Shocks

Cosmas Dery and Apostolos Serletis
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Cosmas Dery: Sam Houston State University

Open Economies Review, 2023, vol. 34, issue 5, No 2, 977 pages

Abstract: Abstract We assess the relative importance of fiscal and monetary policy shocks in explaining macroeconomic fluctuations in the United States. Using a Bayesian structural vector autoregressive model, we identify fiscal and monetary policy shocks based on a penalty function approach. We find that monetary policy shocks are relatively more important than fiscal policy shocks in explaining key macroeconomic variations and especially inflation variations. Our results provide evidence in support of a monetarist explanation of US business cycles.

Keywords: Fiscal shocks; Monetary shocks; Output; Inflation; Business cycles; E32; E52; E58; E62; E63 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11079-023-09712-x

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