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Fiscal and monetary policies in the BRICS: A panel VAR approach

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  • Jawadi, Fredj
  • Mallick, Sushanta K.
  • Sousa, Ricardo M.

Abstract

Using a Panel Vector Auto-Regressive (PVAR) model, we assess the macroeconomic impact of fiscal policy and monetary policy shocks for five key emerging market economies—Brazil, Russia, India, China and South Africa (BRICS). We show that monetary contractions lead to a fall in real economic activity and tighten liquidity market conditions, while government spending shocks have strong Keynesian effects. We also find evidence supporting the existence of accommodative stance between fiscal policy and monetary policy, which is crucial for economic and political decision-making. Our results are robust even after controlling for periods of extreme instability, such as economic and financial crises.

Suggested Citation

  • Jawadi, Fredj & Mallick, Sushanta K. & Sousa, Ricardo M., 2016. "Fiscal and monetary policies in the BRICS: A panel VAR approach," Economic Modelling, Elsevier, vol. 58(C), pages 535-542.
  • Handle: RePEc:eee:ecmode:v:58:y:2016:i:c:p:535-542
    DOI: 10.1016/j.econmod.2015.06.001
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    References listed on IDEAS

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    Cited by:

    1. Landon, Stuart & Smith, Constance, 2017. "Does the design of a fiscal rule matter for welfare?," Economic Modelling, Elsevier, vol. 63(C), pages 226-237.
    2. Agnello, Luca & Castro, Vitor & Hammoudeh, Shawkat & Sousa, Ricardo M., 2017. "Spillovers from the oil sector to the housing market cycle," Energy Economics, Elsevier, vol. 61(C), pages 209-220.
    3. Bhattacharya, Rudrani, 2017. "Effectiveness of monetary policy in stabilising food inflation: Evidence from advanced and emerging economies," Working Papers 17/209, National Institute of Public Finance and Policy.
    4. Goyal, Ashima & Arora, Sanchit, 2016. "Estimating the Indian natural interest rate: A semi-structural approach," Economic Modelling, Elsevier, vol. 58(C), pages 141-153.

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