The Comovement between Monetary and Fiscal Policy Instruments: Post-War Period in US

This file is part of IDEAS, which uses RePEc data

The Comovement between Monetary and Fiscal Policy Instruments: Post-War Period in US

Author Info

Jesús Vázquez () (The University of the Basque Country)

Additional information is available for the following registered author(s):

Jesús Vázquez

Abstract

This paper empirically studies the dynamic relationship between monetary and fiscal policies by analyzing the comovements between the Fed funds rate and the primary deficit/output ratio. Simple economic thinking establishes that a negative correlation between Fed rate and deficit arises whenever the two policy authorities share a common stabilization objective. However, when budget balancing concerns lead to a drastic deficit reduction the Fed may reduce the Fed rate in order to smooth the impact of fiscal policy, which results in a positive correlation between these two policy instruments. The empirical results show (i) a significant negative comovement between Fed rate and deficit and (ii) that deficit and output gap Granger-cause the Fed funds rate during the post-Volcker era, but the opposite is not true.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

Publisher Info
Paper provided by University of the Basque Country - Department of Foundations of Economic Analysis II in its series DFAEII Working Papers with number 200806.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length:
Date of creation: 08 Apr 2008
Date of revision:
Publication status: Forthcoming in Spanish Economic Review
Handle: RePEc:ehu:dfaeii:200806

Contact details of provider:
Postal: Avenida Lehendakari Aguirre, 83, 48015 Bilbao
Phone: 34-946013774
Fax: 34-946017123
Web page: http://www.ehu.es/FAEII/
More information through EDIRC

Order Information:
Postal: Dpto. de Fundamentos del Análisis Económico II, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
Email:

For technical questions regarding this item, or to correct its listing, contact: (Cruz Angel Echevarria).

Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

This paper has been announced in the following NEP Reports:

NEP-ALL-2008-04-21 (All new papers)
NEP-CBA-2008-04-21 (Central Banking)
NEP-MAC-2008-04-21 (Macroeconomics)
NEP-MON-2008-04-21 (Monetary Economics)

Statistics

Access and download statistics

Did you know? IDEAS is not the only service displaying RePEc data. Choose on RePEc which service fits your needs best.

This page was last updated on 2008-8-29.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.