IMF Working Papers Volume 2022 Issue 170: Effective Fiscal-Monetary Interactions in Severe Recessions (2022)

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Effective Fiscal-Monetary Interactions in Severe Recessions

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Mr. Jiaqian Chen

Mr. Jiaqian Chennull

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Mr. Raphael A Espinoza

Mr. Raphael A Espinoza
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Carlos Goncalves

Carlos Goncalvesnull

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Tryggvi Gudmundsson

Tryggvi Gudmundsson
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Martina Hengge

Martina Henggenull

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Zoltan Jakab

Zoltan Jakab
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Jesper Lindé

Jesper Lindénull

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Series:: IMF Working Papers

Volume/Issue:: Volume 2022: Issue 170

Publication Date:: 02 Sep 2022

DOI:: https://doi.org/10.5089/9798400218880.001

ISBN:: 9798400218880

ISSN:: 1018-5941

Pages:: 47

Keywords:: monetary policy rate; government spending hike; recession scenario; rate in Botswana; hike in liquidity trap; open economy; Inflation; Inflation targeting; Fiscal stimulus; Africa; Global

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Series:: IMF Working Papers

Volume/Issue:: Volume 2022: Issue 170

Language:: English

Publication Date:: 02 Sep 2022

DOI:: https://doi.org/10.5089/9798400218880.001

ISBN:: 9798400218880

ISSN:: 1018-5941

Pages:: 47

Keywords:: monetary policy rate; government spending hike; recession scenario; rate in Botswana; hike in liquidity trap; open economy; Inflation; Inflation targeting; Fiscal stimulus; Africa; Global

Legal-disclaimer:: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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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.

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IMF Working Papers

ISSN:: 1018-5941

Publisher:: International Monetary Fund

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