Impulse on the Aggregate Demand in Bolivia through the coordination of the Monetary and Fiscal Policy in crisis time

Valdivia Coria, Joab Dan and Valdivia Coria, Daney (2017): Impulse on the Aggregate Demand in Bolivia through the coordination of the Monetary and Fiscal Policy in crisis time.

Abstract

At the end of 2014, the Bolivian economy, despite facing negative external shocks (falling oil prices), registered a high economic growth in the region of Latin America. Monetary policy was aimed at keeping the government bond rate close to zero and raising liquidity levels in the economy (monetary policy expansive). On the part of the government, the two main sources of income of the nonfinancial public sector (SPNF) are: i) tax revenues and ii) the sale of hydrocarbons (gas), at that time Bolivia's fiscal policy was countercyclical To the behavior of the Latin American Product (increases in fiscal expenditure in infrastructure). These antecedents, aid to the interest of the study of the coordination of the economic policy in Bolivia. The structure of a Dynamic Stochastic General Equilibrium Model (DSGE) helps us to understand the transmission channels of shocks (in Taylor rule, Phillips curve and public investment) and how the monetary and fiscal policy reacts to these shocks.

• Item Type: MPRA Paper
• English Title: Impulse on the Aggregate Demand in Bolivia through the coordination of the Monetary and Fiscal Policy in crisis time1
• Language: English
• Keywords: Bayesian Estimation, Monetary Policy, Fiscal Policy, Dynamic Stochastic General Equilibrium Model (DSGE).
• Subjects: E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E59 - Other; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy

References

Agénor, P.R., Montiel, P., Development Macroeconomics, Princeton University Press.

Blanchard O. y Perotti R. (2002) “An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output,” Quarterly Journal of Economics 117(4): 1329-68.

Ethan I., Mendoza E. y Végh C. (2011) “How Big (Small?) are Fiscal Multipliers” IMF Working Paper.

Garcia C., Restrepo J. E. y Tanner E. (2011) “Fiscal Rules in a Volatile World: A Welfare-Based Approach,” IMF Working Paper.

Hamann Franz, Bejarano J., Rodríguez D., y Restrepo-Echavarría P. (2016) “Monetary Policy in an Oil-Exporting Economy”, Federal Reserve Bank of St. Louis REVIEW.

Omojolaibi Joseph y Egwaikhide F. (2013) “A Panel Analysis of Oil Price Dynamics, Fiscal Stance and Macroeconomic Effects: The Case of Some Selected African Countries”, Central Bank of Nigeria Economic and Financial Review.

Roman E. Romero (2008). “Monetary Policy in Oil-Producing Economies”, CEPS Working Paper No. 169.

Šehović D. (2013) “General Aspects of Monetary and Fiscal Policy Coordination,” Journal of Central Banking Theory and Practice.

Shahid Colonel y Gaur M. (2015) “Influence of crude oil price on Monetary policy decisions in context of Indian economy”.

Valdivia, D. (2008): “¿Es importante la fijación de precios para entender la dinámica de la inflación en Bolivia?”, INESAD, WP Nº 02/2008.

Valdivia D. y Montenegro M (2008) “Reglas Fiscales en Bolivia en el contexto de un Modelo de Equilibrio Dinámico General Estocástico,” Social Science Reasearch Network.

Valdivia, J. (2016): “Evaluación de la Política Fiscal de Bolivia”, Noveno encuentro de economistas de Bolivia.

Woodford, M. (2003), Interest & Prices: Foundations of a Theory of Monetary Policy(Princeton: Princeton University Press).

Woodford, M. (2010) “Simple Analytics of the Government Expenditure Multiplier,” Columbia University.

Yasuharu I. (2012) “Non-Wasteful Government Spending in an Estimated Open Economy DSGE Model: Two Fiscal Policy Puzzles Revisited,” Economic and Social Research Institute “ESRI” Discussion Paper Series No.285.

Zubairy S. (2010) “On Fiscal Multipliers: Estimates from a Medium Scale DSGE Model,” Bank of Canada Working Paper 2010-30.