Abstract:Using optimising policy framework, we build and estimate a small-scale DSGE model of the US, and tell the story of monetary and …scal policy interactions in 1955-2018. We …nd that …scal policy is important to identify shifts in monetary policy preferences, and it is shaped by the political color. We use this model to analyse the episode of zero lower bound on interest rate in 2008-15. We …nd that the bound constrained monetary policy, explain some observed irregularities in macroeconomic data, and demonstrate … Show more
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