MONETARY POLICY, FISCAL POLICY AND THE GOVERNMENT BUDGET CONSTRAINT

This chapter examines the large net-of-interest deficits in the U.S. federal budget that have marked the administration of Ronald Reagan. It explains the fiscal and monetary actions observed during the Reagan administration as reflecting the optimal decisions of government policymakers. The discussion is based on an equation whose validity is granted by all competing theories of macroeconomics: the intertemporal government budget constraint. The chapter first considers the government budget balance and the optimal tax smoothing model of Robert Barro before analyzing monetary and fiscal policy during the Reagan years: a string of large annual net-of-interest government deficits accompanied by a monetary policy stance that has been tight, especially before February 1985, and even more so before August 1982. Indicators of tight monetary policy are high real interest rates on government debt and pretax yields that exceed the rate of economic growth.

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Relative Effectiveness of Monetary and Fiscal Policies on Output Stabilization in Developing Countries: Evidence from Rwanda

International Journal of Economics and Finance ◽

10.5539/ijef.v10n1p220 ◽

2017 ◽

Vol 10 (1) ◽

pp. 220

Author(s):

Kabanda Richard ◽

Peter W. Muriu ◽

Benjamin Maturu

Keyword(s):

Monetary Policy ◽

Fiscal Policy ◽

Relative Effectiveness ◽

Variance Decomposition ◽

Var Model ◽

Fiscal Policies ◽

Impulse Responses ◽

Exogenous Variables ◽

Output Stabilization ◽

The Government

The aim of this study was to explain the relative effectiveness of monetary and fiscal policies in explaining output in Rwanda. The study used a sample of quarterly data for the period 1996-2014. Applying a recursive VAR, the study used 12 variables, including 5 endogenous and 7exogenous variables to the benchmark model and other two specifications were attempted to capture the true contribution of monetary and fiscal policies to variations in nominal output. Obtained results using impulse responses and variance decomposition provide evidence that monetary policy is more effective than fiscal policy in explaining changes in nominal output in Rwanda. In addition, monetary policy explains better output when the VAR model contains domestic exogenous variables than when they are not included, suggesting the relevance of including domestic exogenous variables in VAR specification of monetary and fiscal policies effectiveness on economic variables. Another suggestion is that in order to achieve higher growth, the government of Rwanda should rely more on monetary policy as compared to fiscal policy.

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A NOTE ON EMPLOYMENT SUBSIDIES AND THE GOVERNMENT BUDGET CONSTRAINT IN A CLOSED ECONOMY

Bulletin of Economic Research ◽

10.1111/j.1467-8586.1981.tb00165.x ◽

1981 ◽

Vol 33 (1) ◽

pp. 3-13 ◽

Cited By ~ 1

Author(s):

S. P. Hannah

Keyword(s):

Budget Constraint ◽

Closed Economy ◽

Government Budget ◽

The Government ◽

Employment Subsidies

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Economic Growth, Policies and Influencing Factors: The Case of Albania

European Journal of Economics and Business Studies ◽

10.26417/ejes.v4i1.p107-115 ◽

2016 ◽

Vol 4 (1) ◽

pp. 107

Author(s):

Eleni Vangjeli ◽

Anila Mancka

Keyword(s):

Economic Growth ◽

Monetary Policy ◽

Fiscal Policy ◽

Interest Rates ◽

Empirical Analysis ◽

Influencing Factors ◽

Fiscal Policies ◽

The Government ◽

High Level ◽

The Empirical Analysis

Monetary and fiscal policies are two policies that the government could use to keep a high level of growth, with a low inflancion. Fiscal policy has its initial impact on the stock market, while monetary policy in market assets. But, given that the goods and active markets are closely interrelated, both policies, monetary as well as fiscal have impact on the economy, increasing the level of product through the reduction of interest rates. In our paper we will show how functioning monetary and fiscal policies. But also in our paper we will analyze the different factors which have affected the economic growth of the country. The focus of our study is the graphical and empirical analysis of economic growth, policies and influencing factors. For the empirical analysis we have used data on the economic growth in Albania for 1996– 2014.

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