Assessing the effects of monetary and fiscal policy
AbstractThis paper has two objectives: the first is to jointly analyse monetary and fiscal policy with a structural VAR model, evaluate the dynamic impact of policy shocks on U.S. output and prices and the contributions of these two sources to fluctuations in these variables. The second objective is to investigate if and how the effects of monetary policy are altered by the inclusion of fiscal policy variables in a benchmark monetary VAR. It is found that both monetary policy and fiscal policy have small effects on output and the price level and that neither of these shocks are important sources of fluctuations in either variable. The magnitude of the responses of output and prices to a monetary policy shock and the contribution of these shocks are reduced significantly once fiscal policy is introduced.
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Bibliographic InfoPaper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 425.
Date of creation: Nov 2001
Date of revision:
fiscal policy; monetary policy; impulse responses; omitted variables;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
- H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
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- cipollone piero, 2001. "Is the Italian Labour market segmented?," Temi di discussione (Economic working papers) 400, Bank of Italy, Economic Research and International Relations Area.
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