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The identification of fiscal and monetary policy in a structural VAR

Listed author(s):
  • Dungey, Mardi
  • Fry, Renée

Good economic management depends on understanding shocks from monetary policy, fiscal policy and other sources affecting the economy and their subsequent interactions. This paper presents a new methodology to disentangle such shocks in a structural VAR framework. The method combines identification via sign restrictions, cointegration and traditional exclusion restrictions within a system which explicitly models stationary and non-stationary variables and accounts for both permanent and temporary shocks. The usefulness of the approach is demonstrated on a small open economy where policy makers are actively considering the interaction between monetary and fiscal policies.

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File URL: http://www.sciencedirect.com/science/article/pii/S0264-9993(09)00080-7
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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 26 (2009)
Issue (Month): 6 (November)
Pages: 1147-1160

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Handle: RePEc:eee:ecmode:v:26:y:2009:i:6:p:1147-1160
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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