Fiscal and Monetary Policy Interactions in a DSGE Model for the Romanian Economy

Alina Bobaşu () and Bogdan Murarașu ()
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Alina Bobaşu: Bucharest University of Economic Studies.
Bogdan Murarașu: Bucharest University of Economic Studies.
Authors registered in the RePEc Author Service: Bogdan Muraraşu ()

Journal for Economic Forecasting, 2021, issue 2, 5-21

Abstract: n this paper, we analyze the fiscal and monetary policy interactions using a DSGE model for an open economy. The model is estimated for the Romanian economy using Bayesian techniques and several important simulations are provided to offer valuable answers to the issues : what are the effects of fiscal policy and whether the build-up of government debt matters for the medium-term sustainability of the economy. We find that the accommodative monetary policy plays a significant role in the effects the fiscal policy exerts on the real economic activity. Moreover, the initial public debt ratio matters in model-based simulations and an above 60 per cent public debt makes the economy more vulnerable when cushioning the adverse shocks.

Keywords: fiscal and monetary policy shocks; general equilibrium; fiscal multipliers; accomodative policy; public debt (search for similar items in EconPapers)
JEL-codes: C11 D58 E52 E62 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:rjr:romjef:v::y:2021:i:2:p:5-21

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