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Empirical evidence on the U.S. monetary–fiscal policy mix

Author

Listed:
  • Carlevaro, Emiliano A.
  • Haque, Qazi
  • Magnusson, Leandro M.

Abstract

This paper revisits the U.S. fiscal-monetary policy mix using econometric methods that are robust to weak identification and sensitive to structural changes. We find that the pre-Volcker period was predominantly characterised by a passive monetary-passive fiscal regime, consistent with indeterminacy and the presence of self-fulfilling inflationary expectations. In contrast, the post-Volcker period exhibits strong evidence of an active monetary-passive fiscal regime, reflecting greater inflation control and fiscal discipline.

Suggested Citation

  • Carlevaro, Emiliano A. & Haque, Qazi & Magnusson, Leandro M., 2026. "Empirical evidence on the U.S. monetary–fiscal policy mix," Economics Letters, Elsevier, vol. 261(C).
    • Handle: RePEc:eee:ecolet:v:261:y:2026:i:c:s0165176526000522
    DOI: 10.1016/j.econlet.2026.112858
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    Keywords

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    JEL classification:

    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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