The identification of fiscal and monetary policy in a structural VAR

Renee Fry, Mardi Dungey

    Research output: Contribution to journalArticle

    Abstract

    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.
    Original languageEnglish
    Pages (from-to)1147-1160
    JournalEconomic Modelling
    Volume26
    Issue number6
    DOIs
    Publication statusPublished - 2009

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