Coordination of Monetary and Fiscal Policies
IMF Working Papers, March 1, 1998
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- Coordination of Monetary and Fiscal Policies
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Bibliographic details
- Published: March 1, 1998
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451844238.001
Context and motivation
- Recent trends: monetary authorities increasingly focused on implementing policies to ensure price stability and strengthen central bank independence.
- Concurrent fiscal development: market development has allowed public debt managers to focus more on cost minimization.
- Central observation: the “divorce” of monetary and debt management functions does not reduce the need for effective coordination of monetary and fiscal policy to optimize and maintain overall economic performance in the long term.
Analysis and scope
- Approach: review of the relevant literature and of country experiences from an institutional and operational perspective.
- Subject coverage: Banking; Central bank credit; Central banks; Fiscal policy; Government debt management; Monetary base; Money; Public debt; Public financial management (PFM).
- Keywords emphasized in the study: budget deficit; Central bank credit; Coordination; debt management instrument; debt management procedure; debt service; exchange rate; Fiscal policy; fiscal policy adjustment; fiscal policy coordination; fiscal policy mix; Global; government cash balance; Government debt management; government securities; Monetary base; monetary management; Monetary policy; WP.
Key findings
- Institutional change: separation of monetary policy and debt management functions has been established in many contexts.
- Operational implication: despite separation, coordinated policy remains necessary to achieve favorable macroeconomic outcomes.
- Emphasis: coordination is important both for short-run stabilization and long-term economic performance (as inferred from the paper’s framing and literature/country review).
Policy implications and recommendations
- Maintain effective coordination mechanisms between monetary authorities and fiscal/debt management bodies even when institutional separation exists.
- Consider institutional and operational arrangements that facilitate information sharing and policy alignment to minimize conflicts between price stability objectives and public debt management goals.
- Ensure that market development and debt management practices that focus on cost minimization do not undermine macroeconomic stability or central bank objectives.
Content in this bundle
- Coordination of Monetary and Fiscal Policies - WP/98/25