A VECM Analysis of Monetary and Fiscal Policies for the EU
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This paper investigates the relative impact of monetary and fiscal policies on nine countries of the European Union(EU), using quarterly data between 1980:Q1 and 2012:Q3. Based on vector autoregression(VAR), cointegration and vector error correction model(VECM) are adopted to uncover relationships in both long-run and short-run; also dynamic interactions are identified to establish these relationships between variables through impulse response functions and variance decomposition methods. Results suggest that: In Austria, both monetary and fiscal policies have positive effects on the real national income; monetary policy has larger impact on GDP. In Denmark, fiscal policy has positive effect on the real national income. In Greece, both monetary and fiscal policies have positive effects on the real national income; monetary policy has larger impact on GDP. In Ireland, fiscal policy has positive effects on the real national income in the short-run. In Italy, no clear conclusions on the effects of both policies on GDP. In the Netherlands, fiscal policy has positive effects on the real national income. In Portugal, monetary policy has small positive effects on the real national income. In Spain, monetary has positive effects on the real national income. In Sweden, both fiscal and monetary policies have positive effects on the real national income; monetary policy has larger impact on GDP. The results show that increase in money supply has positive effect on the economic growth in Austria, Greece, Portugal, Spain and Sweden. In Denmark, Ireland and the Netherlands, increase in government spending stimulated economic growth.
Abstract
This paper investigates the relative impact of monetary and fiscal policies on nine countries of the European Union(EU), using quarterly data between 1980:Q1 and 2012:Q3. Based on vector autoregression(VAR), cointegration and vector error correction model(VECM) are adopted to uncover relationships in both long-run and short-run; also dynamic interactions are identified to establish these relationships between variables through impulse response functions and variance decomposition methods. Results suggest that: In Austria, both monetary and fiscal policies have positive effects on the real national income; monetary policy has larger impact on GDP. In Denmark, fiscal policy has positive effect on the real national income. In Greece, both monetary and fiscal policies have positive effects on the real national income; monetary policy has larger impact on GDP. In Ireland, fiscal policy has positive effects on the real national income in the short-run. In Italy, no clear conclusions on the effects of both policies on GDP. In the Netherlands, fiscal policy has positive effects on the real national income. In Portugal, monetary policy has small positive effects on the real national income. In Spain, monetary has positive effects on the real national income. In Sweden, both fiscal and monetary policies have positive effects on the real national income; monetary policy has larger impact on GDP. The results show that increase in money supply has positive effect on the economic growth in Austria, Greece, Portugal, Spain and Sweden. In Denmark, Ireland and the Netherlands, increase in government spending stimulated economic growth.
참고문헌 (46)
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