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The identification of fiscal and monetary policy in a structural VAR
journal contributionposted on 2023-05-17, 02:07 authored by Dungey, M, Fry, R
Good economic management depends on understanding shocks from monetary policy, fiscal policy and other sources affecting the economy and their subsequent interactions. This paper presents a new methodology to disentangle such shocks in a structural VAR framework. The method combines identification via sign restrictions, cointegration and traditional exclusion restrictions within a system which explicitly models stationary and non-stationary variables and accounts for both permanent and temporary shocks. The usefulness of the approach is demonstrated on a small open economy where policy makers are actively considering the interaction between monetary and fiscal policies.
Publication titleEconomic Modelling
PublisherElsevier Science Bv
Place of publicationPo Box 211, Amsterdam, Netherlands, 1000 Ae
Rights statementThe definitive version is available at http://www.sciencedirect.com