Belova E.A., Perevyshin Yu.N.Published in:
Russian Journal of Entrepreneurship
– Volume 18, Number 2 (January 2017)



Keywords: active monetary policy, fiscal and monetary policy, inflation, Markov-switching models, passive monetary policy, the budget deficit


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Abstract:

Transition to inflation targeting policy implies the responsibility of the Bank of Russia for the dynamics of the price level. However, the actions of the government, conducting the fiscal policy, can impede the achievement of the inflation target for the central bank. In this regard, the study of the ways of interaction between monetary and fiscal authorities has an important practical task. The article provides an overview of the main approaches to modeling the interaction of fiscal and monetary policies in both theoretical and empirical research: the problem of trade-off between output and inflation; the problem of sustainability of public debt and the rate of inflation, the regime change from active to passive. The paper also shows the econometric testing of monetary policy regime using a Markov switching model by the example of New Zealand over the time period 1990-2016.

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