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

Author

Listed:
  • Emiliano A. Carlevaro

    (The University of Adelaide)

  • Qazi Haque

    (The University of Adelaide)

  • Leandro M. Magnusson

    (University of Western Australia)

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. However, we cannot rule out the possibility of a passive monetary-active fiscal configuration during the 1960s and 1970s, in line with the Fiscal Theory of the Price Level. 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

  • Emiliano A. Carlevaro & Qazi Haque & Leandro M. Magnusson, "undated". "Empirical evidence on the U.S. monetary-fiscal policy mix," School of Economics and Public Policy Working Papers 2025-05 Classification-E6, University of Adelaide, School of Economics and Public Policy.
    • Handle: RePEc:adl:wpaper:2025-05
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    File URL: https://media.adelaide.edu.au/economics/papers/doc/wp2025-05.pdf
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