Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/215443
Authors: 
Ankargren, Sebastian
Shahnazarian, Hovick
Year of Publication: 
2019
Series/Report no.: 
Sveriges Riksbank Working Paper Series No. 365
Abstract: 
This paper estimates the interaction between monetary- and fiscal policy using a structural VAR model with time-varying parameters. For demand and supply shocks, the two policies are estimated to be complementary, while for monetary and fiscal policies shocks the two policies act as substitutes. The budget elasticity varies between 0.3-0.6, indicating that an economic downturn can get a non-negligible negative impact on public finances. The fiscal multiplier is estimated to be stable and higher than one suggesting that fiscal policy can be used to support monetary policy to stabilize the economy in case monetary policy is constrained by the lower effective bound.
Subjects: 
Fiscal policy
monetary policy
time-varying parameter structural
VAR
zero and sign restrictions
Bayesian estimation
JEL: 
C11
C32
E52
E62
E63
Document Type: 
Working Paper

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