Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/218993 
Year of Publication: 
2020
Series/Report no.: 
DIW Discussion Papers No. 1872
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
We reexamine whether pre-Volcker U.S. fiscal policy was active or passive. To do so, we estimate a DSGE model with monetary and fiscal policy interactions employing a sequential Monte Carlo algorithm (SMC) for posterior evaluation. Unlike existing studies, we do not have to treat each policy regime as distinct, separately estimated, models. Rather, SMC enables us to estimate the DSGE model over its entire parameter space. A differentiated perspective results: pre-Volcker macroeconomic dynamics were similarly driven by a passive monetary/passive fiscal policy regime and fiscal dominance. Fiscal policy actions, especially government spending, were critical in the pre-Volcker inflation build-up.
Subjects: 
Bayesian Analysis
DSGE Models
Monetary-Fiscal Policy Interactions
Monte Carlo Methods
JEL: 
C11
C15
E63
E65
Document Type: 
Working Paper

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