IDEAS home Printed from https://ideas.repec.org/a/mes/emfitr/v51y2015i4p729-746.html
   My bibliography  Save this article

The Fiscal-Monetary Policy Mix and Exchange Rate Stability: A Dynamic Stochastic General Equilibrium Model With Chinese Characteristics

Author

Listed:
  • Junxue Jia
  • Jing Guo
  • Zijie Wang

Abstract

We develop a small open economy model and compare alternative fiscal-monetary policy mixes using data for China. We show that the trade-offs faced by policy makers involve not only the stabilization of output, inflation, and real exchange rates, but also government debt stability. The source of shocks has important implications for the trade-offs. In the face of external shocks to interest rates or inflation, a passive fiscal and active monetary policy mix performs well in stabilizing government liabilities, inflation, and real exchange rates but generates higher output volatility. An active fiscal and active monetary policy mix is much more stabilizing in response to internal shocks to government expenditures or sector-specific productivity.

Suggested Citation

  • Junxue Jia & Jing Guo & Zijie Wang, 2015. "The Fiscal-Monetary Policy Mix and Exchange Rate Stability: A Dynamic Stochastic General Equilibrium Model With Chinese Characteristics," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 51(4), pages 729-746, July.
    • Handle: RePEc:mes:emfitr:v:51:y:2015:i:4:p:729-746
    DOI: 10.1080/1540496X.2015.1046345
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/1540496X.2015.1046345
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/1540496X.2015.1046345?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Roger Alejandro Banegas Rivero & Marco Alberto Nunez Ramirez & Sacnicte Valdez Del Rio, 2021. "Interaction of Economic Policy. Lessons on Social Welfare and Risk Premium," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 17(1), pages 7-29.
    2. Yang‐Chao Wang & Jui‐Jung Tsai & Shushu Li & Yiying Huang, 2023. "The impacts of RMB internationalization on onshore and offshore RMB markets," International Review of Finance, International Review of Finance Ltd., vol. 23(3), pages 502-523, September.
    3. , Le Thanh Tung, 2022. "How Do Fiscal-Monetary Policies Affect Economic Growth? The Case Of Vietnam," OSF Preprints nhfqg, Center for Open Science.
    4. Liu, Ding & Sun, Weihong & Chang, Long, 2021. "Monetary–fiscal policy regime and macroeconomic dynamics in China," Economic Modelling, Elsevier, vol. 95(C), pages 121-135.
    5. Ma, Yong, 2016. "Nonlinear monetary policy and macroeconomic stabilization in emerging market economies: Evidence from China," Economic Systems, Elsevier, vol. 40(3), pages 461-480.
    6. Dat Thanh Nguyen & Viet Anh Hoang, 2020. "Monetary Consequences of Fiscal Stress in a Game Theoretic Framework," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 9(special i), pages 125-164.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mes:emfitr:v:51:y:2015:i:4:p:729-746. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/MREE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.