Monetary and Fiscal Policy Interactions Over the Cycle: Some Empirical Evidence

40 Pages Posted: 9 Jan 2003

See all articles by Anton Muscatelli

Anton Muscatelli

University of Glasgow - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Patrizio Tirelli

Department of Economics and Management; Università degli Studi di Milano-Bicocca - Center for European Studies (CefES)

Carmine Trecroci

University of Brescia

Date Written: December 2002

Abstract

This paper estimates VAR models to examine the response of monetary and fiscal policy to macroeconomic targets, and the interdependence between the two policy instruments. The models are estimated for a number of G7 countries. Our findings show that, whilst monetary and fiscal policy are increasingly used as strategic complements, the responsiveness of fiscal policy to the business cycle has decreased since the 1980s. We also demonstrate that shifts in the strategic interdependence between fiscal and monetary policy can be captured using Bayesian VAR models.

JEL Classification: E63, E58, E60

Suggested Citation

Muscatelli, Vito Anton and Tirelli, Patrizio and Trecroci, Carmine, Monetary and Fiscal Policy Interactions Over the Cycle: Some Empirical Evidence (December 2002). CESifo Working Paper Series No. 817, Available at SSRN: https://ssrn.com/abstract=367162 or http://dx.doi.org/10.2139/ssrn.367162

Vito Anton Muscatelli (Contact Author)

University of Glasgow - Department of Economics ( email )

Adam Smith Building
Glasgow, Scotland G12 8RT
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Patrizio Tirelli

Department of Economics and Management ( email )

Corso Strada Nuova, 65
27100 Pavia, 27100
Italy

HOME PAGE: http://https://sites.google.com/site/patriziotirellihomepage/

Università degli Studi di Milano-Bicocca - Center for European Studies (CefES)

U6 Building
Viale Piero e Alberto Pirelli, 22
Milano, 20126
Italy

Carmine Trecroci

University of Brescia ( email )

Via San Faustino 74B
Brescia, 25122
Italy

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