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Article
Publication date: 10 October 2016

Cleiton Silva de Jesus and Fernando Motta Correia

The purpose of this paper is to investigate whether fiscal policy may be a complementary instrument to monetary policy in the macrostabilization process.

2184

Abstract

Purpose

The purpose of this paper is to investigate whether fiscal policy may be a complementary instrument to monetary policy in the macrostabilization process.

Design/methodology/approach

The authors developed a dynamic system with two linear differential equations in order to verify if an active fiscal policy can be compatible with macroeconomic equilibrium in three monetary policy regimes (conservative, alternative and hybrid). The authors also use numerical simulations because it is impossible to extract analytically full conclusions from the theoretical model.

Findings

The results suggest that fiscal policy can be a useful tool for macroeconomic stabilization; the counter-cyclical role of fiscal policy is compatible with dynamic equilibrium only if the monetary authority is not lenient towards inflation; and under an active fiscal policy a hybrid monetary regime is preferable to a conservative one.

Originality/value

This paper offers a theoretical contribution to explicate the macroeconomic implications of fiscal policy.

Details

Journal of Economic Studies, vol. 43 no. 5
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 11 May 2015

Thiago Henrique Carneiro Rios Lopes and Cleiton Silva de Jesus

– The purpose of this paper is to ascertain whether countries benefit from capital account liberalization in more democratic contexts.

1292

Abstract

Purpose

The purpose of this paper is to ascertain whether countries benefit from capital account liberalization in more democratic contexts.

Design/methodology/approach

The authors used the follow methodologies in this paper: Pooled OLS, panel data with fixed effects and generalized method of moments. The empirical exercises were conducted for both a large sample and a smaller group of developing countries. Given the characteristics of the variables used in the standard model, the main conclusions were obtained from an estimation that took into account the presence of fixed effects and endogeneity.

Findings

Considering a sample of 77 countries, the authors were able to ascertain that capital account openness has a positive effect on economic growth only in highly democratic countries. When the same estimates are carried out with a more restricted sample, composed of 50 developing countries, the results are more pessimistic. In this case, capital account openness has a negative and significant effect, although being more democratic is not sufficient in itself to reap the benefits of financial integration.

Research limitations/implications

The results obtained in this paper are limited to the number of observations and the period analysed. Furthermore, the conclusions need to be confirmed by a test of robustness, which should be conducted in future works; such works could make use of other democracy indicators and other instruments.

Originality/value

The innovation of the work, in comparison to those the authors consulted, resides in its testing, through an interactive variable, whether the effect of capital openness on economic growth depends on level of democracy.

Details

Journal of Economic Studies, vol. 42 no. 2
Type: Research Article
ISSN: 0144-3585

Keywords

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