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Policy Mix Coherence Index (PMCI): A Proposal

Gammadigbe Vigninou

MPRA Paper from University Library of Munich, Germany

Abstract: From the policy mix theory to the related empirical works, the quantification of the coordination of monetary and fiscal policies seems to be missing. In this paper, we propose an index (PMCI) which measures the coherent nature of the policy mix rather than it restrictive or expansive character. It is defined as the average number of periods that monetary and fiscal policies have been in phase in a Keynesian perspective. After calculating the index for thirty (30) countries over the period 1990 to 2013, we explore the relationship between the policy mix coherence and the stabilization of the activity. The econometric analysis provides empirical evidence that good coordination of monetary and fiscal policies reduces the output volatility.

Keywords: Coordination; Monetary policy; Fiscal policy. (search for similar items in EconPapers)
JEL-codes: C21 C43 E61 (search for similar items in EconPapers)
Date: 2015-04-10
New Economics Papers: this item is included in nep-cba and nep-mac
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