The Dilemmas of Monetary and Fiscal Policy Coordination
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Publication date: 2006-02-28
GNPJE 2006;205(1-2):1-17
Monetary and fiscal coordination is extensively discussed in economic publications. The debate involves both mainstream and institutional economics as well as political sciences. The article contributes to this debate. It reviews theoretical positions adopted in mainstream economics and examines various aspects of the macroeconomic policy mix. The author selectively presents policy mix experiences in select regions of the world, specifically the European Monetary Union, the United States and Great Britain. The article confronts some theoretical studies with practice and points to the weaknesses of empirical testing based on econometric methods. The author applies a historic/comparative method characteristic of qualitative research. The results of the analysis show that, unlike in Great Britain, monetary and fiscal coordination is missing in the euro zone and the United States. This is largely due to the equal status of the government and the central bank. Reviewing the methodological aspect of the problem, the author concludes that the empirical testing of models for the coordination of government and central-bank decisions should be supported with a comparative historical analysis.
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