Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/147789
Authors: 
Nasir, Muhammad Ali
Yago, Milton
Soliman, Alaa M.
Wu, Junjie
Year of Publication: 
2016
Citation: 
[Journal:] Cogent Economics & Finance [ISSN:] 2332-2039 [Volume:] 4 [Year:] 2016 [Issue:] 1 [Pages:] 1-25
Abstract: 
This study derives an optimal macroeconomic policy combination for financial sector stability in the United Kingdom by employing a New Keynesian Dynamic Stochastic General Equilibrium (NK-DSGE) framework. The empirical results obtained show that disciplined fiscal and accommodative monetary policies stance is optimal for financial sector stability. Furthermore, fiscal indiscipline countered by contractionary monetary stance adversely affects financial sector stability. Financial markets, e.g. stocks and Gilts show a short-term asymmetric response to macroeconomic policy interaction and to each other. The asymmetry is a reflection of portfolio adjustment. However in the long-run, the responses to suggested optimal policy combination had homogenous effects and there was evidence of co-movement in the stock and Gilt markets.
Subjects: 
optimal policy
financial markets
wealth effects
Bayesian estimation
NK-DSGE model
JEL: 
C11
E44
E61
G12
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/4.0/
Document Type: 
Article

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