Acta Univ. Agric. Silvic. Mendelianae Brun. 2014, 62(2), 373-381 | DOI: 10.11118/actaun201462020373

The Interaction of Monetary and Fiscal Policy in the Countries of the Visegrad Group

Jan Janků, Stanislav Kappel
Department of National Economy, Faculty of Economics, VŠB - Technical University of Ostrava, Sokolská tř. 33, 701 21 Ostrava 1, Czech Republic

Coordination of or at least absence of conflict between monetary and fiscal policies are key to the successful implementation of economic policy. The article aims to use reaction functions to assess whether the monetary and fiscal policies in the countries of the Visegrad Group are in coordination or in conflict and which variables influence their decisions. The central bank is the representative of monetary policy, which has interest rates as its instrument, and the government as the representative of the fiscal policy which has change revenue or spending as a share of GDP as instrument. To obtain the results, multivariate regression analysis is used. The research period is based on quarterly observations from first quarter of 2000 to the fourth quarter of 2012. Stabilizing role of monetary policy and in some countries also partially stabilizing role of fiscal policy has been found. Another result was that in the case of the Czech Republic, Slovakia and Poland, monetary policy appears to play the dominant role, whereas fiscal policy plays dominant role in Hungary. In the case of Slovakia, some different results may be due to Slovakia's participation in ERM II, which led to the monetary policy, in addition to maintaining price stability, also aiming to maintain a fixed exchange rate and the subsequent entry of Slovakia into the Eurozone and the de facto loss of autonomous monetary policy.

Keywords: fiscal policy, interactions, monetary policy, policy coordination, policy objectives
Grants and funding:

This article was created with the financial support of the Student Grant Competition Ekf, VSB-TU Ostrava under the project SP2013/179 "The interaction of monetary and fiscal policy in the context of game theory in the countries of the Visegrad Group".

Prepublished online: May 23, 2014; Published: February 1, 2014  Show citation

ACS AIP APA ASA Harvard Chicago IEEE ISO690 MLA NLM Turabian Vancouver
Janků, J., & Kappel, S. (2014). The Interaction of Monetary and Fiscal Policy in the Countries of the Visegrad Group. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 62(2), 373-381. doi: 10.11118/actaun201462020373
Share...
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. BALBONI, F., BUTI, M. and LARCH, M., 2007: ECB vs. Council vs. Commission: Monetary and Fiscal Policy Interactions in the EMU When Cyclical Conditions are Uncertain. In: European Economy: Economic Papers. Brusseles: European Commision, 34 p. ISBN 978-92-79-04630-8.
    2. BEETSMA, R. M. W. J., BOVENBERG, A. L., 1998: Monetary Union without Fiscal Coordination May Discipline Policymakers. Journal of International Economics, 45,2: 239-258. ISSN 0022-1996. DOI: 10.1016/S0022-1996(98)00031-2 Go to original source...
    3. BUTI, M., ROEGER, W. and VELD in't J., 2001: Monetary and Fiscal Policy Interactions under a Stability Pact. In: Economics Working Paper ECO2001/08. Fiesole Firenze: European University Institute.
    4. CLARIDA, R., GALÍ, J. and GERTLER, M. 1998: Monetary Policy Rules in Practice: Some International Evidence. European Economic Review, 42, 6: 1033-1067. ISSN 0014-2921. DOI: 10.1016/S0014-2921(98)00016-6 Go to original source...
    5. DEMERTZIS, M. A., HUGHES HALLET, A. and VIEGI, N., 2004: An Independent Central Bank Faced with Elected Governments. European Journal of Political Economy, 20, 4: 904-922. ISSN 0176-2680. DOI: 10.1016/j.ejpoleco.2003.12.004 Go to original source...
    6. DIXIT, A., LAMBERTINI, L., 2003: Interactions of Commitment and Discretion in Monetary and Fiscal Policies. The American Economic Review, 93, 5: 1522-1542. ISSN 0002-8282. DOI: 10.1257/000282803322655428 Go to original source...
    7. European Central Bank, c2013. Statistical Data Warehouse [online]. [cit. 2013-06-23]. Available from Internet: http://sdw.ecb.europa.eu/browseSelection.do?DATASET=0&DATASET=1&sfl2=4&REF_AREA=106&sfl4=4&GOVNT_ST_SUFFIX=G&node=9485585.
    8. EUROSTAT, c2013: Statistics Database [online]. [cit. 2013-06-28]. Available from Internet: http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database.
    9. FRIEDMAN, M., 1948: A Monetary and Fiscal Framework for Economic Stability. The American Economic Review, 38, 3: 245-264. ISSN 0002-8282.
    10. FRIEDMAN, M., 1968: The Role of Monetary Policy. The American Economic Review, 58, 1: 1-17. ISSN 0002-8282.
    11. GALI, J., PEROTTI, R., 2003: Fiscal Policy and Monetary Integration in Europe. In: Working Paper No. 9773. Cambridge (MA): NBER. Go to original source...
    12. HUGHES HALLET, A., LIBICH, J. and STEHLÍK, P., 2014: Monetary and Fiscal Policy Interaction with Various Degrees of Commitment. Czech Journal of Economic and Finance, 64, 1: 2-29. ISSN 0015-1920.
    13. LEEPER, E. M., 2010: Monetary Science, Fiscal Alchemy. In: Working Paper No. 16510. Cambridge (MA): NBER. Go to original source...
    14. LEITH, C., THADDEN, L. von, 2006: Monetary and Fiscal Policy Interactions in a New Keynesian Model with Capital Accumulation and Non-Ricardian Consumers. Working Paper Series No 649. ISSN 1725-2806. Go to original source...
    15. LIBICH, J., SAVAGE, J. and WALSH, C. E., 2011: Monetary-Fiscal Interactions: How to Improve Policy Outcomes? Economic Papers, 30, 1: 1-5. ISSN 1759-3441. DOI: 10.1111/j.1759-3441.2011.00112.x Go to original source...
    16. LIBICH, J., STEHLÍK, P. and SAVAGE, J., 2010: Fiscal Neglect in a Monetary Union. Economic Papers, 29, 3: 301-309. ISSN 1759-3441. DOI: 10.1111/j.1759-3441.2010.00074.x Go to original source...
    17. MELITZ, J., 2000: Some Cross-Country Evidence about Fiscal Policy Behavior and Consequences for EMU [Mimeo]. CREST-INSEE and CEPR.
    18. MUSCATELLI, A., TIRELLI, P. and TRECROCI, C., 2004: Fiscal and Monetary Policy Interactions in a New Keynesian Model with Liquidity Constraints. In: Centre for Dynamics Macroeconomic Analysis Conference Papers 2004. Glasgow: Univesity of Glasgow, p. 40.
    19. ONORANTE, L., 2006: Interaction of fiscal policies on the Euro area: how much pressure on the ECB? In: Economics Working Paper ECO 2006/9. Fiesole Firenze: European University Institute, pp. 34.
    20. ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT, 2013: OECD StatExtracts [online]. [cit. 2013-06-20]. Available from Internet: http://stats.oecd.org/Index.aspx?DataSetCode=MEI_PRICES#.
    21. ŘEŽÁBEK, P., 2011: Měnová politika a její interakce s politikou fiskální. 1. vyd. Praha: Karolinum, 128 s. ISBN 978-80-246-1894-4.
    22. SARGENT, T. J., WALLACE, N., 1981: Some Unpleasant Monetarist Arithmetic. Federal Reserve Bank of Minneapolis Quarterly Review, 5, 3: 1-17. ISSN 0271-528. Go to original source...
    23. TAYLOR, J. B., 1993: Discretion versus policy in practice. Carbegie-Rochester Conference Series on Public Policy, 39: 195-214. ISSN 0167-2231. DOI: 10.1016/0167-2231(93)90009-L Go to original source...
    24. TINBERGEN, J., 1954: Centralization and Decentralization in Economic Policy. Amsterdam: North Holland Pub. Co., 80 p. ISBN 0-313-23077-3.
    25. VAN AARLE, B., ENGWERDA, J. and PLASMANS, J., 2002: Monetary and Fiscal Policy Interaction in the EMU: A Dynamic Game Approach. Annals of Operations Research, 109, 1-4: 229-264. ISSN 1572-9338. DOI: 10.1023/A:1016308420460 Go to original source...
    26. WYPLOSZ, CH., 1999: Economic Policy Coordination in EMU: Strategies and Institutions. In: Financial Supervision and Policy Coordination in the EMU. Working paper B 11. Bonn: ZEI - Center for European Integration Studies, University of Bonn.

    This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY NC ND 4.0), which permits non-comercial use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content