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The effects of macroeconomic policies under fixed exchange rates: A Bayesian VAR analysis

Author

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  • Dragan Tevdovski
  • Goran Petrevski
  • Jane Bogoev

Abstract

We analyse the effects of fiscal and monetary policies in Croatia and Macedonia estimated by a Bayesian vector autoregression (VAR). The main results of the study are as follows. Fiscal tightening leads to economic expansion in Macedonia and a decline in economic activity in Croatia. In both countries fiscal tightening leads to a decline in inflation and money market rates. Monetary tightening leads to output contraction and a decline in inflation in both countries. We find an opposite reaction of the fiscal authorities to a monetary shock, i.e., monetary contraction is accompanied by fiscal tightening in Croatia and by loose fiscal policy in Macedonia.

Suggested Citation

  • Dragan Tevdovski & Goran Petrevski & Jane Bogoev, 2019. "The effects of macroeconomic policies under fixed exchange rates: A Bayesian VAR analysis," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 32(1), pages 2138-2160, January.
    • Handle: RePEc:taf:reroxx:v:32:y:2019:i:1:p:2138-2160
    DOI: 10.1080/1331677X.2019.1579661
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    Cited by:

    1. Zhongdong Yu & Wei Liu & Liming Chen & Serkan Eti & Hasan Dinçer & Serhat Yüksel, 2019. "The Effects of Electricity Production on Industrial Development and Sustainable Economic Growth: A VAR Analysis for BRICS Countries," Sustainability, MDPI, vol. 11(21), pages 1-13, October.
    2. Gancho Ganchev & Ivan Todorov, 2021. "Taxation, government spending and economic growth: The case of Bulgaria," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 7(3), pages 255-266.
    3. Faton Sulejmani & Dragan Tevdovski, 2025. "The Macroeconomic Effects Of Fiscal Consolidation After Crises: Evidence From A Small Open Economy," Proceedings of the International Conference "Economic and Business Trends Shaping the Future" 011, Faculty of Economics-Skopje, Ss Cyril and Methodius University in Skopje.

    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • 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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