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Strategic Interaction Between Fiscal and Monetary Policies in an Export-Oriented Economy

  • Sergey Merzlyakov

    ()

    (Laboratory for Macroeconomic Analysis, National Research University Higher School of Economics, Moscow, Russia)

Solving the problem of stabilizing the economy is directly tied to the necessity of keeping the main macroeconomic variables stable. However, macroeconomic stability is not in the general case a purely fiscal or a purely monetary problem. How the central bank and the government interact is of principle importance. We investigate the impact of macroeconomic policies on the dynamics of the exchange rate, inflation, output and stabilization fund and consider different forms of strategic interaction between the government and the central bank. In this paper we build a stylized model of an export-oriented economy. We use numerical examples for our analysis and practical conclusions. The effective interaction of fiscal and monetary policies is possible under a cooperative Stackelberg game interaction with the government as leader. It is shown that the independence of the central bank does not play a crucial role.

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Article provided by Savez ekonomista Vojvodine, Novi Sad, Serbia in its journal Panoeconomicus.

Volume (Year): 59 (2012)
Issue (Month): 2 (May)
Pages: 201-216

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Handle: RePEc:voj:journl:v:59:y:2012:i:2:p:201-216
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  1. Beetsma, Roel M. W. J. & Bovenberg, A. Lans, 1999. "Does monetary unification lead to excessive debt accumulation?," Journal of Public Economics, Elsevier, vol. 74(3), pages 299-325, December.
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  11. Alesina, Alberto & Tabellini, Guido, 1987. "Rules and Discretion with Noncoordinated Monetary and Fiscal Policies," Economic Inquiry, Western Economic Association International, vol. 25(4), pages 619-30, October.
  12. Menguy, Séverine, 2011. "Monetary and Fiscal Policy in the EMU : Conflict or Coordination?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 26, pages 361-385.
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