Essays on Efficiency and Coordination of Fiscal Policies in Interdependent Economies PDF Download
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Author: Irem Zeyneloglu
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Irem Zeyneloglu
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Hemantha Kumuduni Jalath Ekanayake
Publisher:
ISBN:
Category : Economic policy
Languages : en
Pages : 380
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The core of this PhD dissertation consists of three research essays on issues related to fiscal and monetary interdependence. The general message across all three essays is that monetary and fiscal interdependence matters for economic stability. The first research essay explores the implications of fiscal and monetary interdependence on price stability. The essay is built upon a small open economy model which explains the link between fiscal deficits and inflation. The model is tested empirically using country level (Sri Lankan) data under several specifications. Overall, it finds strong evidence to support a positive link between fiscal deficit and inflation. However, the findings do not support the view that the fiscal deficit-inflation link becomes stronger when public sector wages are factored out. The second essay examines the case for relative independence between fiscal and monetary authorities. Despite the wide spread interest in reforms that ensures greater independence of central banks over the last few decades, there are still huge variations in the degree of central bank independence across countries. Investigating factors that underlie the level of central bank independence, the essay argues that relative independence between the two institutions is determined mainly by three concepts, i.e. inflationary bias, global cohesive pressure, and political incentives. The findings show that the relevance of these concepts in determining central bank independence across developing and developed country samples is very different. An inflationary bias hypothesis induces the relative independence of monetary authorities in developed countries, yet inhibits the same process in developing countries. In contrast, political incentives play a major role in granting independent status to monetary authorities in developing countries. The essay also measures the efficiency levels of central bank reforms and finds that, over time, only developed countries leap-frog upward on the efficiency scale of central bank reforms. The third research essay examines fiscal crises in two dimensions, crisis incidence and crisis duration in order to broaden the understanding of how fiscal and monetary policy actions contribute to a country's fiscal stability. Using macroeconomic, institutional, and demographic indicators, it is found that, in addition to the fiscal authority's own functions, the functions of the monetary authority, such as reserves accumulation and an inflation targeting monetary policy regime, reduce the probability of a crisis occurring, as well as its duration. The findings also show that policies that help prevent a fiscal crisis do not necessarily contribute to fast recovery from a crisis. This indicates the importance of applying specific policy measures during each stage of a fiscal crisis episode. - provided by Candidate.
Author: International Monetary Fund
Publisher: International Monetary Fund
ISBN: 1451844239
Category : Business & Economics
Languages : en
Pages : 33
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Recently, monetary authorities have increasingly focused on implementing policies to ensure price stability and strengthen central bank independence. Simultaneously, in the fiscal area, market development has allowed public debt managers to focus more on cost minimization. This “divorce” of monetary and debt management functions in no way lessens the need for effective coordination of monetary and fiscal policy if overall economic performance is to be optimized and maintained in the long term. This paper analyzes these issues based on a review of the relevant literature and of country experiences from an institutional and operational perspective.
Author: Jesper Lindé
Publisher:
ISBN: 9789172585072
Category : Fiscal policy
Languages : en
Pages : 139
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Author: Kenneth John Weiller
Publisher:
ISBN:
Category : Economic policy
Languages : en
Pages : 444
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Author: Thitima Chucherd
Publisher:
ISBN:
Category : Fiscal policy
Languages : en
Pages : 474
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This thesis addresses interactions between monetary and fiscal policies in a theoretical dynamic stochastic general equilibrium (DSGE) model of a small open economy and in an empirical model under a structural vector error correction model (SVECM). The thesis consists of three essays. The contribution is both theoretical and empirical that enables a better understanding of the complexity of interactions between monetary and fiscal policies in small open economies. The first essay examines the equilibrium determinacy under monetary and fiscal rules. The goal is to investigate how monetary and fiscal policy interactions ensure a unique and non-explosive (determinate) equilibrium for a small open economy. The study focuses when policy makers implement a set of policy mixes to address domestic output price inflation control for monetary policy, debt stabilization for fiscal policy, and joint output stabilization tasks. The result indicates that two policy schemes facilitate a determinate equilibrium. First, monetary policy actively controls inflation when fiscal policy sets a sufficient feedback on debt. Second, monetary policy becomes passive against inflation when fiscal policy is insolvent. Adding output stabilization to each rule simply causes variants of this fundamental. An interest rate rule with output stabilization can be more passive against inflation while providing a stronger response to the output gap. Fiscal policy is required to set higher feedback on debt along with its stronger counter-cyclical policy. The second essay links between the equilibrium determinacy and policy optimization. This essay provides insights into the design of policy mixes and compares determinacy outcomes between two theoretical models of a small open economy: with and without an explicit exchange rate role. This study shows that policy interactions in a small open economy with an endogenous exchange rate is quite sophisticated, especially when a monetary rule is added with an output stabilization task and/or targeted to Consumer Price Index (CPI) inflation. Additional concern for monetary policy in an open economy causes a partial offset to its reaction on domestic output price inflation that weakens its effect on the real debt burden. To minimize economic fluctuations, policy makers should mute the role of output stabilization for monetary policy, and set minimum feedback on debt that is compatible with the degree of counter-cyclical fiscal policy. Substantially active response to inflation is satisfactory for monetary policy with CPI inflation targeting. The third essay empirically presents monetary and fiscal policy interactions in Thailand's SVECM suggested by a theoretical DSGE model developed from the previous essays. This essay shows that the DSGE-SVECM model can be supported by Thai data. A shock to monetary policy is effective with a lag. Government spending policy is also effective with a lag and some crowding-out effects on output. An adverse shock in tax policy unexpectedly stimulates the economy, indicating room for enhancing economic growth by relaxing revenue constraint. Monetary policy is mainly implemented to correct a consequence of a fiscal shock on inflation (and also the domestic and foreign shocks), while fiscal policy appears to counter a consequence of the monetary policy shock on output.
Author: Andrew J. Hughes Hallett
Publisher: Springer Science & Business Media
ISBN: 1475747381
Category : Political Science
Languages : en
Pages : 222
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The launch of European Monetary Union (EMU) marked the beginning of a new era, and its establishment has proved an impressive success at the technical, legal, and procedural level. After all, EMU has accelerated economic and political integration in the European Union and tied the economies of the Member States closer together. However, the performance of the euro, high unemployment rates, uneven output and investment growth, and the issue of structural reforms that have yet to be tackled have raised questions about the performance of EMU in practice. There is a general consensus on the justification for economic policy coordination. The existing literature on economic policy coordination, however, seems far from able to provide robust conclusions about how to organize the necessary interaction of institutions and policies. Therefore, there seems to be a case for re-examining the subject under the new framework set by EMU. The objective of such a reassessment is to enhance the understanding of what type of coordination and what institutional setting for policy coordination can be expected to be most favorable. Challenges for Economic Policy Coordination within European Monetary Union provides an intellectually stimulating contribution to the ongoing debate.
Author: Richard Hemming
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 62
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This paper reviews the theoretical and empirical literature on the effectiveness of fiscal policy. The focus is on the size of fiscal multipliers, and on the possibility that multipliers can turn negative (i.e., that fiscal contractions can be expansionary). The paper concludes that fiscal multipliers are overwhelmingly positive but small. However, there is some evidence of negative fiscal multipliers.
Author: Jacob A. Frenkel
Publisher: University of Chicago Press
ISBN: 0226262545
Category : Business & Economics
Languages : en
Pages : 422
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This volume brings together nine papers from a conference on international macroeconomics sponsored by the NBER in 1985. International economists as well as graduate students in the fields of global monetary economics, finance, and macroeconomics will find this an outstanding contribution to current research. It includes two commentaries for each paper, written by experts in the field, and Frenkel's detailed introduction, which serves as a reader's guide to the arguments made, the models employed, and the issues raised by each contributor. The studies analyze national fiscal policies within the context of the international economic order. Malcolm D. Knight and Paul R. Masson use an empirical model to show that fiscal changes in recent years in the United States, West Germany, and Japan have caused major disturbances in net savings and investment flows. Linda S. Kole uses a two-country simulation model to examine the effects of a large nation's expansion on exchange rates, interest rates, and the balance of payments. In other studies, Warwick J. McKibbin and Jeffrey D. Sachs discuss the influences of different currency regimes on the international transmission of inflation; Kent P. Kimbrough analyzes the interaction between optimal tax policies and international trade; Sweder van Wijnbergen investigates the interrelation of fiscal policies, trade intervention, and world interest rates; and Willem H. Buiter uses an analytical model to look at fiscal interdependence and optimal policy design. David Backus, Michael Devereux, and Douglas Purvis develop a theoretical model to investigate effects of different fiscal policies in an open economy. Alan C. Stockman looks at the influence of policy anticipation in the private sector, while Lawrence H. Summers shows the effects of differential tax policy on international competitiveness.
Author: Mr.Paul R. Masson
Publisher: International Monetary Fund
ISBN: 9781557751119
Category : Business & Economics
Languages : en
Pages : 438
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Copublished with the Brookings Institution, Washington D.C. and the Centre for Economic Policy Research, London, and edited by Ralph Bryant, David Currie, Jacob A. Frenkel, Paul Masson, and Richard Portes, this volume considers economic interdependence among well developed countries as well as between them and the developing regions of the world.
