The effects of macroeconomic policies under fixed exchange rates: A Bayesian VAR analysis
Journal
Economic Research-Ekonomska Istraživanja
Date Issued
2019-01
Author(s)
Bogoev, Jane
DOI
10.1080/1331677x.2019.1579661
Abstract
We analyse the effects of fiscal and monetary policies in Croatia and Macedonia estimated by a Bayesian vector autoregression (VAR). The main results of the study are as follows. Fiscal tightening leads to economic expansion in Macedonia and a decline in economic activity in Croatia. In both countries fiscal tightening leads to a decline in inflation and money market rates. Monetary tightening leads to output contraction and a decline in inflation in both countries. We find an opposite reaction of the fiscal authorities to a monetary shock, i.e., monetary contraction is accompanied by fiscal tightening in Croatia and by loose fiscal policy in Macedonia.
Subjects