Interaction between Monetary and Fiscal Policy and the Policy Mix, Theoretical Consideration and Japanese Experience
AbstractInteractions between monetary and fiscal policy depend on the specification of policy variables that fiscal policy uses. However, a general rule is that when monetary policy is capable of dealing with sticky price adjustment, a primary concern of fiscal authority should be to remedy the resource allocation. My regression study using cross-country data shows that in a majority of OECD countries fiscal policy relies on the automatic stabilizer. Japan is a unique case in that it relies heavily on discretionary fiscal policy. However, Japanese policymakers have recently changed their thinking regarding fiscal policy.
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Bibliographic InfoPaper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-365.
Length: 41 pages
Date of creation: Sep 2005
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Other versions of this item:
- Yasushi Iwamoto, 2005. "Interaction between Monetary and Fiscal Policy and the Policy Mix, Theoretical Consideration and Japanese Experience," CARF F-Series CARF-F-043, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
- NEP-ALL-2005-10-15 (All new papers)
- NEP-CBA-2005-10-15 (Central Banking)
- NEP-MAC-2005-10-15 (Macroeconomics)
- NEP-MON-2005-10-15 (Monetary Economics)
- NEP-PBE-2005-10-15 (Public Economics)
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