## The Fiscal Effects of Monetary Policy

_IMF Working Papers, May 1, 1998_

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## Bibliographic details
- Authors: Momi Dahan
- Published: May 1, 1998
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451962185.001

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### Summary and main findings
- The paper develops a simple framework to examine the budgetary implications of monetary policy measures.
- Using this framework, it outlines the various channels of influence that tight monetary policy may have on the budget deficit.
- The cumulative effect might be quantitatively large although each effect might be small.
- Most of the effects tend to increase the budget deficit as a result of tight monetary policy.
- Tight monetary policy causes a short-run decrease in the government debt.
- Conclusion: macroeconomic policy coordination should be considered.

### Framework and channels of influence
- Presents a simple analytical framework to link monetary policy measures to budgetary outcomes.
- Identifies multiple channels through which tight monetary policy can affect the budget deficit (channels are described qualitatively in the source summary).

### Quantitative implications and interpretation
- Emphasizes that while individual effects may be small, their cumulative impact on the budget deficit might be quantitatively large.
- Notes a distinction between short-run and deficit/debt dynamics: tight monetary policy tends to increase the budget deficit but leads to a short-run decrease in government debt.

### Policy recommendations and implications
- Recommends considering macroeconomic policy coordination given the opposing short-run and deficit effects of tight monetary policy.
- Implies that fiscal authorities should account for monetary policy–induced changes in deficit trajectories when planning budget and debt management.

### Publication and metadata
- Author: Momi Dahan
- Date: May 1, 1998
- Series: Working Paper No. 1998/066
- Issue: 066
- Volume: 1998
- Pages: 19
- DOI: https://doi.org/10.5089/9781451962185.001
- Stock No: WPIEA0661998
- ISBN: 9781451962185
- ISSN: 1018-5941
- Subject: Budget planning and preparation, Government debt management, Monetary aggregates, Monetary tightening, Public debt
- Keywords: nominal exchange rate, WP

*IMF Working Papers — "The Fiscal Effects of Monetary Policy" (Momi Dahan), May 1, 1998.*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/the-fiscal-effects-of-monetary-policy-2589_