Active fiscal policy and macroeconomic stability

Active fiscal policy and macroeconomic stability PurposeThe purpose of this paper is to investigate whether fiscal policy may be a complementary instrument to monetary policy in the macrostabilization process.Design/methodology/approachThe authors developed a dynamic system with two linear differential equations in order to verify if an active fiscal policy can be compatible with macroeconomic equilibrium in three monetary policy regimes (conservative, alternative and hybrid). The authors also use numerical simulations because it is impossible to extract analytically full conclusions from the theoretical model.FindingsThe results suggest that fiscal policy can be a useful tool for macroeconomic stabilization; the counter-cyclical role of fiscal policy is compatible with dynamic equilibrium only if the monetary authority is not lenient towards inflation; and under an active fiscal policy a hybrid monetary regime is preferable to a conservative one.Originality/valueThis paper offers a theoretical contribution to explicate the macroeconomic implications of fiscal policy. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economic Studies Emerald Publishing

Active fiscal policy and macroeconomic stability

Loading next page...
 
/lp/emerald-publishing/active-fiscal-policy-and-macroeconomic-stability-0bVCmerMJN
Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0144-3585
DOI
10.1108/JES-03-2015-0052
Publisher site
See Article on Publisher Site

Abstract

PurposeThe purpose of this paper is to investigate whether fiscal policy may be a complementary instrument to monetary policy in the macrostabilization process.Design/methodology/approachThe authors developed a dynamic system with two linear differential equations in order to verify if an active fiscal policy can be compatible with macroeconomic equilibrium in three monetary policy regimes (conservative, alternative and hybrid). The authors also use numerical simulations because it is impossible to extract analytically full conclusions from the theoretical model.FindingsThe results suggest that fiscal policy can be a useful tool for macroeconomic stabilization; the counter-cyclical role of fiscal policy is compatible with dynamic equilibrium only if the monetary authority is not lenient towards inflation; and under an active fiscal policy a hybrid monetary regime is preferable to a conservative one.Originality/valueThis paper offers a theoretical contribution to explicate the macroeconomic implications of fiscal policy.

Journal

Journal of Economic StudiesEmerald Publishing

Published: Oct 10, 2016

There are no references for this article.

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create folders to
organize your research

Export folders, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off