Fiscal and Monetary Nexus in Emerging Market Economies; How Does Debt Matter?

This paper examines two main aspects of the interaction between fiscal and monetary policy in emerging market economies. First, it explores the interest rate-inflation relationship in economies with different levels of external and domestic public debt using panel- and crosssection data. The results show that interest rate-inflation elasticity weakens with debt/GDP and external debt/GDP. Second, it utilizes high-frequency data from Brazil, Turkey, and Poland to examine how market-determined variables react to economic news. The results suggest that when vulnerabilities are high, budget news has the most significant impact on country spreads and interest rates, and the impact of monetary policy is weakened.

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Year of publication:	2006-08-01
Authors:	Vasishtha, Garima ; Baig, Taimur ; Kumar, Manmohan S. ; Zoli, Edda
Institutions:	International Monetary Fund (IMF)
Subject:	Public debt \| Emerging markets \| fiscal policy \| monetary policy \| central bank \| inflation \| monetary fund \| fiscal policy actions \| budget deficit \| tax reform \| budget constraint \| monetary authorities \| budget balance \| monetary economics \| fiscal authorities \| budget deficits \| fiscal theory \| government budget \| government budget constraint \| fiscal variables \| spending cuts \| tax reforms \| bad ? fiscal policy \| aggregate demand \| expansionary fiscal policy \| budget surplus \| state budget \| expansionary fiscal \| long-term interest rates \| fiscal sustainability \| national bank \| monetary policy implications \| fiscal affairs \| bad fiscal policy \| fiscal affairs department \| monetary authority \| eurobonds \| monetary union \| budgetary position \| fiscal deficits \| monetary dynamics \| monetary economies \| monetary policies \| tax cut \| government securities yields \| fiscal balances \| foreign borrowing \| budget law \| fiscal discipline \| fiscal effort \| fiscal vulnerability \| fiscal stance \| fiscal austerity \| fiscal decisions \| fiscal authority \| fiscal expansions \| fiscal policy action \| fiscal solvency \| fiscal situation \| fiscal issues \| fiscal theories \| government budgets \| tight monetary policy \| secondary market government securities \| loose fiscal policy \| public finances \| primary budget surplus \| government securities \| restrictive monetary policy \| fiscal events \| foreign debt \| inflation-targeting \| fiscal space \| reserve requirements \| monetary policy rules \| monetary policy instruments \| fiscal performance \| public finance \| government spending

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Extent:	application/pdf
Series:	IMF Working Papers.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series IMF Working Papers Number 06/184 4 pages long
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005599483