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Combining Monetary and Fiscal Policy in an SVAR for a Small Open Economy

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  • Alfred A. Haug

    ()
    (Department of Economics, University of Otago, New Zealand)

  • Tomasz Jedrzejowicz

    ()
    (National Bank of Poland)

  • Anna Sznajderska

    ()
    (National Bank of Poland)

Abstract

This paper combines a monetary structural vector-autoregression (SVAR)with a fiscal SVAR for Poland. Fiscal foresight, in the form of implementation lags, is accounted for with respect to both discretionary government spending and tax changes. We demonstrate the importance of combining monetary and fiscal transmission mechanisms. However, ignoring fiscal foresight has no statistically significant effects. We calculate an initial government spending multiplier of 0.14, which later peaks at 0.48. The tax multiplier is close to zero. We also find that monetary policy in Poland transmits mainly through the real sector, that is through real GDP and the real exchange rate.

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File URL: http://www.business.otago.ac.nz/econ/research/discussionpapers/DP_1313.pdf
File Function: First version, 2013
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Bibliographic Info

Paper provided by University of Otago, Department of Economics in its series Working Papers with number 1313.

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Length: 39 pages
Date of creation: Oct 2013
Date of revision: Oct 2013
Handle: RePEc:otg:wpaper:1313

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Keywords: Structural vector autoregressions; monetary and fiscal policy; fiscal foresight; narrative approach;

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