the present paper examines the mitigating effect of monetary and fiscal policies on the “growth laffer curve” (glc) using a panel data of 38 high income countries over the period 2003-2012. adopting generalised method of moments (gmm) estimators, the paper finds evidence substantiating the presence of an inverted-u glc. moreover, the evidence suggests that the glc shifts downward by employing e...

The Central Bank of Malaysia is facing unique challenges in transmitting its monetary policies due to Islamic banking, which strictly prohibits the interest payments. This article develops new methodology to calculate the demand for money function in the presence of Islamic banking. It indicates some weaknesses in the existing mechanism and raises thought that would be helpful in revising the m...

A simple model of monetary/labor search is constructed to study Keynesian indeterminacy and optimal policy. In the model, economic agents have trouble splitting the surplus from exchange appropriately, and we consider monetary and fiscal policies that correct this Keynesian inefficiency. A Taylor rule does not imply determinacy, nor does it support an efficient outcome. Optimal policies yield a...

In Krawczyk and Kim (Macroeconomics, 2009), we studied the problem of setting monetary policy in a closed economy using viability theory. Policies derived from the application of viability theory are ‘good enough’, rather than ‘optimal’. In this paper, we extend the analysis to a small open-economy model where the exchange rate becomes an additional channel for the transmission of monetary poli...

In this paper we study the monetary and fiscal policy making in a monetary union when authorities face asymmetries in the countries constructing this monetary union. We analyze this problem in an asymmetric environment using a two-country theoretical model and by introducing two alternative types of national asymmetries : asymmetric shocks and the asymmetric transmission mechanism. The central ...

The interaction of monetary and fiscal policies is a crucial issue in a highly integrated economic area as the European Union. We investigate to which extent the EMU, that introduced a common monetary policy and restrictions on fiscal policy at the national level, benefits from macroeconomic policy cooperation due to the various interactions, spillovers and externalities from national macroecon...

Control on regional government budgets is important in a monetary union as lower tiers of government have fewer incentives to consolidate debt. According to the Fiscal Theory of the Price Level; unsustainable non-Ricardian fiscal policies eventually force monetary policy to adjust. Hence, uncoordinated and non-regulated regional fiscal policies would therefore threaten price stability for the m...

Oil price shocks are the main source of macroeconomic fluctuations in oil exporting countries. It is believed that appropriate monetary policy can help to stabilize these unwanted variations toward optimal allocations. A stochastic dynamic general equilibrium model featuring the properties of both cost push and wealth effect transmission channels is developed for the Iranian economy. In thi...