Arbeitspapier
Monetary and Fiscal Policy in Times of Crises: A New Keynesian Perspective in Continuous Time
To analyse the interdependence between monetary and fiscal policy during a financial crisis, we develop an open-economy DSGE model with monetary and fiscal policy as well as financial markets in a continuous-time framework based on stochastic differential equations. Monetary policy is modelled using both a standard and a modified Taylor rule and fiscal policy is modelled as either expansionary or austere. In addition, we differentiate between open economies and monetary union members. We find evidence that the modified Taylor rule notably reduces the likelihood that the financial market crisis affects the real economy. But if we assume that households are averse with respect to outstanding government debt, we find that a combination of expansionary monetary policy and austere fiscal policy provides better stabilisation of both domestic and foreign economies in terms of both output and inflation. In the case of a monetary union, we find that stabilisation of output in the country where the financial shock originates is no longer as easy and, in terms of prices, there is now deflation in the country where the crisis originated and a positive inflation rate in the other country.
- Sprache
-
Englisch
- Erschienen in
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Series: MAGKS Joint Discussion Paper Series in Economics ; No. 55-2014
- Klassifikation
-
Wirtschaft
Computational Techniques; Simulation Modeling
Financial Markets and the Macroeconomy
Money and Interest Rates: Forecasting and Simulation: Models and Applications
Monetary Policy
Fiscal Policy
Open Economy Macroeconomics
- Thema
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New Keynesian Models
Financial Crisis
Dynamic Stochastic General Equilibrium Models
Continuous Time Model
Fiscal Policy
Monetary Policy
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Hayo, Bernd
Niehof, Britta
- Ereignis
-
Veröffentlichung
- (wer)
-
Philipps-University Marburg, Faculty of Business Administration and Economics
- (wo)
-
Marburg
- (wann)
-
2014
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Hayo, Bernd
- Niehof, Britta
- Philipps-University Marburg, Faculty of Business Administration and Economics
Entstanden
- 2014
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