Original scientific paper
https://doi.org/10.1080/1331677X.2019.1579661
The effects of macroeconomic policies under fixed exchange rates: A Bayesian VAR analysis
Dragan Tevdovski
; Saints Cyril and Methodius University, Skopje, Macedonia
Goran Petrevski
; Saints Cyril and Methodius University, Skopje, Macedonia
Jane Bogoev
; The World Bank, Washington, DC, USA
Abstract
We analyse the effects of fiscal and monetary policies in Croatia and Macedonia estimated by a Bayesian vector autoregression (VAR). The main results of the study are as follows. Fiscal tightening leads to economic expansion in Macedonia and a decline in economic activity in Croatia. In both countries fiscal tightening leads to a decline in inflation and money market rates. Monetary tightening leads to output contraction and a decline in inflation in both countries. We find an opposite reaction of the fiscal authorities to a monetary shock, i.e., monetary contraction is accompanied by fiscal tightening in Croatia and by loose fiscal policy in Macedonia.
Keywords
Fiscal policy; monetary policy; Bayesian VAR;
Hrčak ID:
229533
URI
Publication date:
22.1.2019.
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