(Not) Dancing Together: Monetary Policy Stance and the Government Spending Multiplier

Belinga, Vincent; Ngouana, Constant A Lonkeng

doi:10.5089/9781513572185.001

Cited by 5 publications

(5 citation statements)

References 31 publications

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“…The latter result is new for developing and has important policy implications. A similar finding is described in Belinga and Lonkeng (2015) and Pyun and Rhee (2015) for the US and OECD economies, respectively.…”

Section: Statistical Significance Of Fiscal Multiplierssupporting

confidence: 86%

“…There are two recent contributions that empirically examine the effect of the monetary policy reaction on the size of fiscal multipliers. Belinga and Lonkeng (2015) find that the fiscal multiplier in the US is higher if it coincides with accommodative monetary policy. Similarly, Pyun and Rhee (2015) study a panel of 21 OECD economies during the aftermath of the Great Financial Crisis and find that the combination of fiscal and monetary expansions contributed to fiscal multipliers greater than 1.…”

Section: Introductionmentioning

confidence: 81%

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The size of fiscal Multipliers and the stance of monetary policy in developing economies

Ojeda-Joya¹,

Guzman²

2017

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In this paper we estimate the effect of government consumption shocks on GDP using a panel of 21 developing economies. Our goal is to better understand the reasons for the low fiscal multipliers found in the literature by performing estimations for alternative exchange rate regimes, business-cycle phases, and monetary policy stances. In addition, we perform counterfactual simulations to analyze the possible gains from fiscal-monetary policy coordination. The results imply that government consumption shocks are usually followed by monetary policy tightening in developing economies with flexible regimes. Our simulations show that this reaction partially explains the presence of low fiscal multipliers in these economies. Government consumption shocks imply lower multipliers in developing economies during flexible regimes, economic slowdowns or monetary contractions. In addition, implementing fiscal programs during monetary expansions seems to improve significantly their economic stimulus.

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Section: Statistical Significance Of Fiscal Multiplierssupporting

confidence: 86%

Section: Introductionmentioning

confidence: 81%

The size of fiscal Multipliers and the stance of monetary policy in developing economies

Ojeda-Joya¹,

Guzman²

2017

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“…(1) Donde es un vector 6×1, con las siguientes variables reales: gasto del Gobierno (GG); tasa de interés de política monetaria (TP); índice de seguimiento a la economía (ISE), ingresos tributarios del Gobierno (TAX); cantidad de dinero (M2); y tasa de cambio multilateral (TCR) 4 . El número de rezagos del sistema es p. además, las matrices de dimensión 6×6 contienen todos los coeficientes de interacción dinámica de las variables para cada rezago i. Por último, los residuos corresponden a choques estructurales.…”

Section: Vectores Autorregresivos Con Identificación De Signosunclassified

Multiplicadores fiscales y política monetaria en Colombia. Un análisis contrafactual

Ojeda-Joya

Silva²

2022

Cuad. Econ.

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En este artículo, se calculan multiplicadores fiscales de gasto e impuestos, con información mensual para Colombia, en el periodo 2001-2019. Asimismo, se estudia el efecto de la reacción de política monetaria sobre el tamaño de estos multiplicadores. Se calculan las funciones de impulso-respuesta, derivadas de la estimación de vectores autorregresivos, en los que la identificación de choques está basada en algunos signos de las respuestas. Para los ejercicios contrafactuales, se contrarresta la reacción inicial de política monetaria con un choque de tasa de interés del mismo tamaño y con signo opuesto.

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“…It may be that monetary policy alone is not sufficient to counteract a large negative shock when short-term interest rates are stuck at zero (Wren-Lewis, 2010). Monetary policy and fiscal policy may even be complements, rather than substitutes under some conditions, amplifying each other’s impacts (Belinga and Ngouana, 2015). An analysis of recent studies is decidedly equivocal, noting that ‘the macroeconomic effects of asset purchases are at least twice as large as that for conventional monetary policy’ and concluding that ‘the estimated effects of asset purchases on the economy are subject to considerable uncertainty,’ (Williams, 2014).…”

Section: Fiscal Policy In a Low Interest Rate Environmentmentioning

confidence: 99%

Counter-cyclical public venture capital: Debt-funding as an anti-austerity innovation strategy

Etzkowitz¹,

Etzkowitz

2017

Social Science Information

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This article outlines a counter-cyclical innovation strategy to achieve prosperity, derived from an innovative project, the California Institute for Regenerative Medicine (CIRM). We identify an ‘innovation paradox’ in that the very point in the business cycle, when legislators are tempted to view austerity as a cure for economic downturns and to reduce innovation spend, is when an increase is most needed to create new industries and jobs and innovate out of recession or depression. It is both desirable and possible that policymakers resist the urge to capitulate to the innovation paradox. During periods that exhibit subdued inflation, elevated spare productive capacity, and low government borrowing rates, governments should increase their borrowings and use the proceeds to boost investment targeted towards innovation. We show how the State of California successfully utilized debt financing, traditionally reserved for physical infrastructure projects, to stimulate the development of intellectual infrastructure. Finally, we recommend a halt to European austerity policies and a ‘triple helix’ broadening of narrow ‘smart specialization’ policies that chase a private venture capital chimera. Europe should seize the present macroeconomic opportunity of low interest rates, borrow for innovation and be paid back manifold by ‘picking winners’, similarly to what the USA has been doing through DARPA (Defense Advanced Research Projects Agency) with GPS, as a response to Sputnik, the Internet and artificial intelligence, or the driverless car, formerly known as the ‘autonomous land vehicle’ in its military guise. Proactively targeted macroscopic investments in innovation are needed to solve the productivity/employment puzzle and foster the transition to a knowledge-based society.

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(Not) Dancing Together: Monetary Policy Stance and the Government Spending Multiplier

Cited by 5 publications

References 31 publications

The size of fiscal Multipliers and the stance of monetary policy in developing economies

The size of fiscal Multipliers and the stance of monetary policy in developing economies

Multiplicadores fiscales y política monetaria en Colombia. Un análisis contrafactual

Counter-cyclical public venture capital: Debt-funding as an anti-austerity innovation strategy

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