ABSTRACT
In this paper, we investigated two cases of regions that used expansionary fiscal policies in recent years to increase short-term economic activity: The European Monetary Union and Brazil. Using impulse response functions, we estimated the effects of fiscal stimuli in a New-Keynesian framework provided by the Markov-switching dynamic stochastic general equilibrium (MSDSGE) model. We produced a set of regime-dependent results that suggest that 1) economic policies should be analyzed from a coordination perspective and 2) the selected cases need to make better use of fiscal instruments and to make more accommodative public debt decisions.
Disclosure statement
No potential conflict of interest was reported by the authors.