Taylor rule in a policy-mix analysis for open heterogeneous monetary unions
Journal Title: The Review of Finance and Banking - Year 2017, Vol 9, Issue 2
Abstract
The paper studies, at a purely theoretical level, the monetary-fiscal policy-mix in an open currency union with asymmetric monetary transmission, where the central bank follows an interest rate Taylor rule. It shows that under the optimal monetary policy regime, the fiscal policy can stimulate the output without any impact on inflation. However, if the monetary rule deviates from the optimum, a stabilization bias appears. It can be reduced by a tighter monetary policy, but the heterogeneous monetary transmission produces asymmetric national reactions to shocks. For asymmetric fiscal shocks, output divergences can increase permanently and only a union-wide fiscal strategy accounting for national structural asymmetries can avoid them.
Authors and Affiliations
Cristina Badarau, Andreea Curmei Semenescu
Keywords
Related Articles
- EP ID EP592178
- DOI -
- Views 210
- Downloads 0
Forensic Finance: Market Abuse and Price Manipulation in Security Markets on the Trail
On 19th March 2009, national newspapers in Austria reported on a “turbo scandal” that had been suspected on the Vienna Stock Exchange. Concerned investors argued that the issuers of turbo certificates tried to raid the u...
Ranking of current information technologies by risk and regulatory compliance officers at financial institutions – a German perspective
This paper provides new insights on the relevance of new information technologies for the risk and regulatory compliance management of financial institutions in Germany. 62 executive risk managers and compliance officers...
Does Exchange Rate Affect Remittances in Nigeria?
The size and rate of remittances to Nigeria are remarkable. However, theories do not unanimously pin down the effects of exchange rate on remittances. Employing a simple choice-theoretical model, it was discovered that r...
The Month-of-the-Year Effect in Post-Communist East European Stock Markets
This paper studies the month-of-the-year (MOY) effect between 2004 and 2014, also considering the impact of the 2008 crisis. MOYis present in most East European countries, but the patterns changebetween countries and, al...
Fiscal multipliers in Romania
Using various methods for identifying the econometric model, I estimated the impact and cumulative fiscal multipliers in order to measure the effects of fiscal policy to the real economy. The results come in line with th...