The interaction between fiscal and monetary policies: Evidence from Sweden

Arbeitspapier

This paper estimates the interaction between monetary- and fiscal policy using a structural VAR model with time-varying parameters. For demand and supply shocks, the two policies are estimated to be complementary, while for monetary and fiscal policies shocks the two policies act as substitutes. The budget elasticity varies between 0.3-0.6, indicating that an economic downturn can get a non-negligible negative impact on public finances. The fiscal multiplier is estimated to be stable and higher than one suggesting that fiscal policy can be used to support monetary policy to stabilize the economy in case monetary policy is constrained by the lower effective bound.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Sveriges Riksbank Working Paper Series ; No. 365

Classification and Topics

• Classification: Wirtschaft ; Bayesian Analysis: General ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Monetary Policy ; Fiscal Policy ; Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
• Subject: Fiscal policy ; monetary policy ; time-varying parameter structural ; VAR ; zero and sign restrictions ; Bayesian estimation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ankargren, Sebastian ; Shahnazarian, Hovick
• Event: Veröffentlichung
• (who): Sveriges Riksbank
• (where): Stockholm
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/215443
• Last update: 10.03.2025, 11:44 AM CET