2024/04/24 by Pedro Gomes, Hernán D. Seoane · 1 voice
Economics, Econometrics and Finance · #Global Financial Crisis and Policies #Monetary Policy and Economic Impact #Fiscal Policies and Political Economy
paper · doi:10.1016/j.euroecorev.2024.104727
openalex publication_date 2024/04/24 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/23
We study the role of fiscal and monetary policies in a financially constrained economy. An active monetary–passive fiscal regime amplifies technology shocks, mitigates preference shocks, and neutralizes the expansionary effects of fiscal shocks through “debt deflation” and “real interest rate” channels, compared to an active fiscal–passive monetary policy regime. Several features of the data suggest that in the aftermath of the 2007 Financial crisis, the monetary policy in the United States was more dovish than in the Euro Area while fiscal policy seemed less concerned about the dynamics of sovereign debt, implying that the distinct post-crisis dynamics of the United States and the Euro area can be rationalized through different fiscal and monetary policy mixes.