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The identification of fiscal and monetary policy in a structural VAR

journal contribution
posted on 2023-05-17, 02:07 authored by Dungey, M, Fry, R
Good economic management depends on understanding shocks from monetary policy, fiscal policy and other sources affecting the economy and their subsequent interactions. This paper presents a new methodology to disentangle such shocks in a structural VAR framework. The method combines identification via sign restrictions, cointegration and traditional exclusion restrictions within a system which explicitly models stationary and non-stationary variables and accounts for both permanent and temporary shocks. The usefulness of the approach is demonstrated on a small open economy where policy makers are actively considering the interaction between monetary and fiscal policies.

History

Publication title

Economic Modelling

Volume

26

Issue

6

Pagination

1147-1160

ISSN

0264-9993

Department/School

TSBE

Publisher

Elsevier Science Bv

Place of publication

Po Box 211, Amsterdam, Netherlands, 1000 Ae

Rights statement

The definitive version is available at http://www.sciencedirect.com

Repository Status

  • Restricted

Socio-economic Objectives

Fiscal policy

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