Effective Fiscal-Monetary Interactions in Severe Recessions
Author:
Mr. Jiaqian Chen null

Search for other papers by Mr. Jiaqian Chen in
Current site
Google Scholar
Close
,
Mr. Raphael A Espinoza
Search for other papers by Mr. Raphael A Espinoza in
Current site
Google Scholar
Close
,
Carlos Goncalves null

Search for other papers by Carlos Goncalves in
Current site
Google Scholar
Close
,
Tryggvi Gudmundsson
Search for other papers by Tryggvi Gudmundsson in
Current site
Google Scholar
Close
,
Martina Hengge null

Search for other papers by Martina Hengge in
Current site
Google Scholar
Close
,
Zoltan Jakab
Search for other papers by Zoltan Jakab in
Current site
Google Scholar
Close
, and
Jesper Lindé null

Search for other papers by Jesper Lindé in
Current site
Google Scholar
Close
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.
  • Collapse
  • Expand
IMF Working Papers