CIRJE-F-365 | "Interaction between Monetary and Fiscal Policy and the Policy Mix Theoretical Consideration and Japanese Experience" |
Author Name | Yasushi Iwamoto |
Date | September 2005 |
Full Paper | PDF file@ |
Remarks | Subsequently published in The Effectiveness of Stabilization Politics: The Bank of Corea International Conference 2005, Seoul: Bank of Corea, 2005, pp. 149-183. |
Abstract |
Interactions between monetary and fiscal policy depend on the
specification of policy variables that fiscal policy uses. However, a general
rule is that when monetary policy is capable of dealing with sticky price
adjustment, a primary concern of fiscal authority should be to remedy the
resource allocation. My regression study using cross-country data shows
that in a majority of OECD countries fiscal policy relies on the automatic
stabilizer. Japan is a unique case in that it relies heavily on discretionary
fiscal policy. However, Japanese policymakers have recently changed their
thinking regarding fiscal policy. |