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Monetary and fiscal policy in advanced and developing countries: An analysis before and after the financial crisis

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  • da Silva, Cleomar Gomes
  • Vieira, Flávio Vilela

Abstract

The aim of this article is to evaluate the conduct of monetary and fiscal policies for a panel data of 113 advanced and emerging/developing economies, for the period prior to the beginning of the crisis (2001–2008) and for the period after the financial crisis (2009–2012). The results from the system GMM dynamic panel data models show that monetary policy seems to be countercyclical only for advanced economies in the period prior to the international financial crisis. Fiscal policy behaves in a procyclical way only in the pre-crisis period. In addition to that, interest rate smoothing seems to be an important tool in the conduct of monetary policy around the world. The estimations also show that monetary authorities in advanced economies stopped reacting to the output gap after the crisis, probably due to the zero lower bound on interest rates, switching to unconventional monetary policy measures. The estimations did not find any significant relationship between output gap and government spending, for the post-crisis period, implying no fiscal consolidation process after the crisis.

Suggested Citation

  • da Silva, Cleomar Gomes & Vieira, Flávio Vilela, 2017. "Monetary and fiscal policy in advanced and developing countries: An analysis before and after the financial crisis," The Quarterly Review of Economics and Finance, Elsevier, vol. 63(C), pages 13-20.
    • Handle: RePEc:eee:quaeco:v:63:y:2017:i:c:p:13-20
    DOI: 10.1016/j.qref.2016.04.013
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    More about this item

    Keywords

    Monetary policy; Fiscal policy; Panel data analysis;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • 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

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