Fiscal Policy Key to Stable Economy in Colombia, Study Finds
The article explores how fiscal policy in Colombia can help stabilize the economy alongside monetary policy. By using a specific economic model, the researchers found that adjusting fiscal balance in response to excess tax revenue can reduce the need for the central bank to change interest rates, leading to less exchange rate volatility and a more stable external current account balance. The success of fiscal policy depends on the type of shock, monetary policy response, and the timing of fiscal policy changes.