Monetary and Fiscal Policy Interactions in an Emerging Open Economy: A Non-Ricardian DSGE Approach

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe monetary and scal policy interactions have gained a new research interest after the 2008 crisis due to the global increase of scal debt. This paper constructs a macroeconomic model of joint scal and monetary policy for an emerging open economy taking into account its structural uniqueness. In particular, the two instruments of monetary policy, interest rate and foreign exchange intervention, the two instruments of scal policy, public consumption and public investment, the two types of households, optimizers and rule-ofthumb individuals, and a foreign debt via collateral constraint are modeled here in a single DSGE framework. The parameters are calibrated for the case of Hungary using data over 1995Q1-2011Q3. The impulse response functions to public investment, public consumption, and interest rate shocks reveal some unconventional ndings in favor of the scal theory of price level as opposed to the traditional monetarist doctrine. AbstraktVzhledem ke globálnímu nár ustu skálních dluh u po roce 2008 zap rí cin eného ekonomickou krizí nar ustá zájem o výzkum interakcí monetární a skální politiky. V tomto clánku je navr zen makroekonomický model s propojenou skální a monetární politikou v rozvíje-jící se otev rené ekonomice, který bere v potaz její strukturální jedine cnosti. V jednotném DSGE rámci jsou zde modelovány dva nástroje monetární politiky (úroková míra a devizové intervence), dva nástroje skální politiky (vládní spot reba a vládní investice), dva typy domácností (jedinci optimalizující a jedinci následující jednoduchá pravidla) a zahrani cní dluh modelovaný pomocí omezení na kolaterál. Parametry jsou kalibrovány na Ma , darských údajích za pou zití dat z období prvního kvartálu 1995 a z t retího kvartálu 2011. Odezvy na impulzy v podob e vládních investic, spot reby vlády a zm eny úrokové míry vedou k nekonve cním záv er um podporujícím skální teorii cenové úrovn e v kontrastu k tradi cní monetaristické doktrín e.

Monetary policy rule, exchange rate regime, and fiscal policy cyclicality in a developing oil economy

“…The problem of the saver is, therefore, to maximize its utility (1) The rule-of-thumb household has the same preferences as the saver. It chooses only consumption and labor and its budget constraint is simply this:…”

“…Fourth, households are heterogeneous in their income and access to a nancial market; a certain portion of the population may be liquidity constrained having only wages, without making savings (Mankiw, 2000;Gali, Lopez-Salido & Valles, 2007). These four structural speci cs are incorporated in the model of Algozhina (2012) calibrated for Hungary as the rst emerging market economy to be severely hit by the global nancial crisis of 2008. This paper extends Algozhina (2012) for a subset of emerging open economies which export oil.…”

“…These four structural speci cs are incorporated in the model of Algozhina (2012) calibrated for Hungary as the rst emerging market economy to be severely hit by the global nancial crisis of 2008. This paper extends Algozhina (2012) for a subset of emerging open economies which export oil. The oil exporting developing economies obviously di er from other emerging countries and need to be examined through their own DSGE framework.…”

“…The economy is exposed to a volatile exogenous world oil price shock. A Sovereign Wealth Fund (SWF) is established collecting the oil tax revenues, saving them abroad, and partly transferring to the government budget 1 , and the foreign exchange interventions are related to central bank's reserves that may a ect the interest rate according to a mechanism described by Benes et al (2015). Finally, motivated by Frankel and Catao (2011), monetary policy can follow product price targeting (PPT) as an alternative to consumer price index (CPI); thus, these two anchors need to be compared in a general equilibrium framework jointly with scal policy based on some welfare measure, to nd out which one is preferred.…”

Analysis of Ineffectiveness Arising in “Investor-government” Relations

“…Interaction of government and investors can be modeled by different methods: econometrical methods (Country Policy and Institutional Assessment -CPIA) (Gayle and Martinez, 2008), dynamic stochastic general equilibrium -DSGE) (Algozhina, 2012), real options approach (Barbosa et al, 2013), etc.…”