Time Consistency of Optimal Monetary and Fiscal Policy in a Small Open Economy

2012 ◽  
Author(s):  
Xuan Liu
Keyword(s):  
Fiscal Policy ◽  
Open Economy ◽  
Small Open Economy ◽  
Time Consistency ◽  
Monetary And Fiscal Policy

scholarly journals Fiscal and monetary policy in new Keynesian DSGE models

2014 ◽  
Author(s):  
Πέτρος Βαρθαλίτης
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Open Economy ◽  
Small Open Economy ◽  
New Keynesian ◽  
Dsge Models ◽  
Dsge Model ◽  
Keynesian Model ◽  
Monetary And Fiscal Policy ◽  
Fiscal And Monetary Policy

This thesis is about monetary and fiscal policy in New Keynesian DSGE models. Chapter 2 presents the baseline New Keynesian DSGE model. Monetary policy is in the form of a simple interest rate Taylor-type policy rule, while fiscal policy is exogenous. Chapter 3 extends the model of Chapter 2 to include fiscal policy. Now, both monetary and fiscal policy are allowed to follow feedback rules. Chapter 4 sets up a New Keynesian model of a semi-small open economy with sovereign risk premia. Finally, Chapter 5 builds a New Keynesian DSGE model consisting of two heterogeneous countries participating in a monetary union.Throughout most of the thesis, policy is conducted via "simple", "implementable" and "optimized" feedback policy rules. Using such rules, the aim of policy is twofold: firslty, it aims to stabilize the economy when the latter is hit by shocks; secondly, it aims to improve the economy's resource allocation.

scholarly journals Estimated DSGE Model for Monetary and Fiscal Polic Coordination Analysis – The Case of Serbia

2018 ◽  
Vol 7 (1) ◽  
pp. 145-173
Author(s):  
Tamara Bašić Vasiljev
Keyword(s):  
Fiscal Policy ◽  
Open Economy ◽  
Inflation Targeting ◽  
Small Open Economy ◽  
Banking System ◽  
Fiscal Rules ◽  
New Keynesian ◽  
Keynesian Model ◽  
Financial Dollarization ◽  
Monetary And Fiscal Policy

AbstractWe present a new-Keynesian model for small open economy, with price rigidities stemming from a Calvo pricing scheme (1983), monopolistic banking system, financial dollarization of the economy and monetary and fiscal policy governed by rules. We estimate the model on Serbian data and propose various model extensions that could be used for monetary and fiscal policy analysis. We consider 6 combinations of monetary and fiscal policy regimes, inflation targeting and currency peg on one hand, and discretionary cyclically neutral fiscal policy and fiscal rules, on the other. The model with inflation targeting and discretionary fiscal policy fits the data best.

scholarly journals Monetary-fiscal policies interactions and optimal rules in Egypt

2019 ◽  
Vol 4 (2) ◽  
pp. 138-157
Author(s):  
Sherine Al-shawarby ◽  
Mai El Mossallamy
Keyword(s):  
Fiscal Policy ◽  
Interest Rate ◽  
General Equilibrium ◽  
Open Economy ◽  
Government Spending ◽  
Small Open Economy ◽  
Policy Instruments ◽  
New Keynesian ◽  
Content Type ◽  
Monetary And Fiscal Policy

Purpose This paper aims to estimate a New Keynesian small open economy dynamic stochastic general equilibrium (DSGE) model for Egypt using Bayesian techniques and data for the period FY2004/2005:Q1-FY2015/2016:Q4 to assess monetary and fiscal policy interactions and their impact on economic stabilization. Outcomes of monetary and fiscal authority commitment to policy instruments, interest rate, government spending and taxes, are evaluated using Taylor-type and optimal simple rules. Design/methodology/approach The study extends the stylized micro-founded small open economy New Keynesian DSGE model, proposed by Lubik and Schorfheide (2007), by explicitly introducing fiscal policy behavior into the model (Fragetta and Kirsanova, 2010 and Çebi, 2011). The model is calibrated using quarterly data for Egypt on key macroeconomic variables during FY2004/2005:Q1-FY2015/2016:Q4; and Bayesian methods are used in estimation. Findings The results show that monetary and fiscal policy instruments in Egypt contribute to economic stability through their effects on inflation, output and debt stock. The monetary policy Taylor rule estimates reveal that the Central Bank of Egypt (CBE) attaches significant importance to anti-inflationary policy and (to a lesser extent) to output targeting but responds weakly to nominal exchange rate variations. CBE decisions are significantly influenced by interest rate smoothing. Egyptian fiscal policy has an important role in output and government debt stabilization. Additionally, the fiscal authority chooses pro-cyclical government spending and counter-cyclical tax policies for output stabilization. Again, past values of the fiscal instruments are influential in the evolution of the future fiscal policy-making process. Originality/value A few studies have examined the interaction between monetary and fiscal policy in Egypt within a unified framework. The presented paper integrates the monetary and fiscal policy analysis within a unified dynamic general equilibrium open economy rational expectations framework. Without such a framework, it would not be easy to jointly analyze monetary and fiscal transmission mechanisms for output, inflation and debt. Also, it would be neither possible to contrast the outcome of monetary and fiscal authorities commitment to a simple Taylor instrument rule vis-à-vis optimal policy outcomes nor to assess the behavior of monetary and fiscal agents in macroeconomic stability in context of an active/passive policy decisions framework.

scholarly journals Monetary and fiscal policy mix in a small open economy: Evidence from Nigeria

2020 ◽  
Vol 8 ◽  
pp. e00346 ◽  
Author(s):  
Moses Kpughur Tule ◽  
Samuel Funmilade Onipede ◽  
Godday Uwawunkonye Ebuh
Keyword(s):  
Fiscal Policy ◽  
Open Economy ◽  
Small Open Economy ◽  
Policy Mix ◽  
Monetary And Fiscal Policy
Sign in / Sign up

Export Citation Format

Share Document