Economics, Econometrics and Finance
4 years ago

Fiscal policy effects hinge on active monetary policy, study finds.

RePEc: Research Papers in Economics
Monetary Policy Rules and the Effects of Fiscal Policy
Noritaka Kudoh, Hong Thang Nguyen

Paper Summary

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The article explores how different types of monetary policy rules can affect the impact of fiscal policy on the economy. In a simple model, it is found that for a stable economy, monetary policy cannot be too aggressive or too passive. The effects of fiscal policy depend on whether monetary policy is active or passive, regardless of how strict monetary policy is.