The effects of macroeconomic policies under fixed exchange rates: A Bayesian VAR analysis

Dragan Tevdovski, Goran Petrevski and Jane Bogoev

Economic Research-Ekonomska Istraživanja, 2019, vol. 32, issue 1, 2138-2160

Abstract: We analyse the effects of fiscal and monetary policies in Croatia and Macedonia estimated by a Bayesian vector autoregression (VAR). The main results of the study are as follows. Fiscal tightening leads to economic expansion in Macedonia and a decline in economic activity in Croatia. In both countries fiscal tightening leads to a decline in inflation and money market rates. Monetary tightening leads to output contraction and a decline in inflation in both countries. We find an opposite reaction of the fiscal authorities to a monetary shock, i.e., monetary contraction is accompanied by fiscal tightening in Croatia and by loose fiscal policy in Macedonia.

Date: 2019
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Working Paper: The effects of macroeconomic policies under fixed exchange rates: A Bayesian VAR analysis (2016)
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DOI: 10.1080/1331677X.2019.1579661

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