Monetary and Fiscal Policy Interactions and the Impact of the COVID-19 Pandemic

The Latin American Experience in Perspective

Authors

  • Richard C. K. Burdekin Claremont McKenna College
  • John Horan Qatalyst Partners
  • Ran Tao Lake Forest College

DOI:

https://doi.org/10.20525/ijfbs.v13i1.3384

Keywords:

Central banks, Budget deficits, Latin America, COVID-19

Abstract

Although the onset of the pandemic pressured monetary and fiscal policy across the globe, deficit finance was aided by the large, established debt markets in countries like the United States.  The expansionary efforts in emerging markets like Latin America put greater strains on their more limited capacity.  Our study analyzes data from seven Latin American countries, three European countries, three Asian countries, and the United States. We utilize panel vector autoregressive (VAR) models to explore the dynamic interactions and feedback mechanisms among the policy variables, while accounting for unobserved country-specific effects.  Our results demonstrate strong and significant interactions between monetary and fiscal policy around the time of the pandemic, with the primary causal effects running from fiscal to monetary policy.  Additionally, our results yield evidence of countercyclical policy reactions to inflation for both monetary and fiscal policy over the pandemic period.  

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Published

2024-06-08

How to Cite

Burdekin, R., Horan, J., & Tao, R. (2024). Monetary and Fiscal Policy Interactions and the Impact of the COVID-19 Pandemic: The Latin American Experience in Perspective . International Journal of Finance & Banking Studies (2147-4486), 13(1), 37–45. https://doi.org/10.20525/ijfbs.v13i1.3384