IMF Working Papers

Effective Fiscal-Monetary Interactions in Severe Recessions

By Jiaqian Chen, Raphael A Espinoza, Carlos Goncalves, Tryggvi Gudmundsson, Martina Hengge, Zoltan Jakab, Jesper Lindé

September 2, 2022

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Jiaqian Chen, Raphael A Espinoza, Carlos Goncalves, Tryggvi Gudmundsson, Martina Hengge, Zoltan Jakab, and Jesper Lindé. Effective Fiscal-Monetary Interactions in Severe Recessions, (USA: International Monetary Fund, 2022) accessed December 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The COVID-19 pandemic and the subsequent need for policy support have called the traditional separation between fiscal and monetary policies into question. Based on simulations of an open economy DSGE model calibrated to emerging and advance economies and case study evidence, the analysis shows when constraints are binding a more integrated approach of looking at policies can lead to a better policy mix and ultimately better macroeconomic outcomes under certain circumstances. Nonetheless, such an approach entails risks, necessitating a clear assessment of each country’s circumstances as well as safeguards to protect the credibility of the existing institutional framework.

Publication Details

  • Pages:

    47

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2022/170

  • Stock No:

    WPIEA2022170

  • ISBN:

    9798400218880

  • ISSN:

    1018-5941