Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/121099
Authors: 
Algozhina, Aliya
Year of Publication: 
2012
Series/Report no.: 
FIW Working Paper 94
Abstract: 
The monetary and fiscal policy interactions have gained a new research interest after the 2008 crisis due to the global increase of fiscal debt. This paper constructs a macroeconomic model of joint fiscal and monetary policy for an emerging open economy taking into account its structural uniqueness. In particular, the two instruments of monetary policy, interest rate and foreign exchange intervention, the two instruments of fiscal policy, public consumption and public investment, the two types of households, optimizers and rule-ofthumb individuals, and a foreign debt via collateral constraint are modeled here in a single DSGE framework. The parameters are calibrated for the case of Hungary using data over 1995Q1-2011Q3. The impulse response functions to public investment, public consumption, and interest rate shocks reveal some unconventional findings in favor of the fiscal theory of price level as opposed to the traditional monetarist doctrine.
Subjects: 
monetary policy
fiscal policy
emerging open economy
collateral constraint
fiscal theory of price level
JEL: 
E31
E52
E62
E63
F41
H54
H63
Document Type: 
Working Paper

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