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Economies
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Monetary and Fiscal Economics in the Context of Macroeconomic Stability
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Monetary and Fiscal Economics in the Context of Macroeconomic Stability

A special issue of Economies (ISSN 2227-7099). This special issue belongs to the section "Macroeconomics, Monetary Economics, and Financial Markets".

Deadline for manuscript submissions: 30 June 2025 | Viewed by 4635

Special Issue Editors

Dr. Joanna Stawska

E-Mail Website
Guest Editor
Department of Central Banking and Financial Intermediation, Faculty of Economics and Sociology, University of Lodz, 90-214 Lodz, Poland
Interests: monetary policy; fiscal policy; policy mix; public finances; game theory; economic policy; corporate investments and financial system stability
Prof. Dr. Paulo Reis Mourão

E-Mail Website
Guest Editor
Department of Economics, University of Minho, Braga, Portugal
Interests: monetary policy; fiscal policy; policy mix; public finances; game theory; economic policy; corporate investments and financial system stability
Special Issues, Collections and Topics in MDPI journals

Special Issue Information

Dear Colleagues,

Macroeconomic stability is sought by many, if not all, economies in the world. In the geoeconomic field, with the growing threat resulting from the susceptibility of economies to fluctuations in external economic conditions that affect national business cycles, macroeconomic stability is rarely achieved. In constantly changing economic conditions, including periods of financial crises, debt crises, energy crises, the COVID-19 pandemic, military crises, and others, economic authorities are forced to make unprecedented decisions. In the face of crises, such as the COVID-19 pandemic, central banks decided to undertake an expansionary monetary policy not only using low interest rates but also often unconventional monetary policy in the form of asset purchase programs. In turn, most governments around the world were forced to pursue expansionary fiscal policies to stimulate the economy. Governments, deciding to protect jobs and stimulate the economy, became excessively indebted, which resulted in growing budget deficits and, thus, public debts.

Therefore, macroeconomic policy can be perceived as an important impetus for economic authorities to intervene in economic processes with the intention of restoring internal and external balance. A. W. Philips and R. Mundell developed a method for assessing macroeconomic stability based on the macroeconomic stabilization pentagon, which refers to five macroeconomic indicators: annual GDP growth rate; unemployment rate; inflation rate; public finance sector deficit; and foreign debt rate. The literature also indicates another method for assessing the macroeconomic situation: the Macroeconomic Imbalance Procedure (MIP).

This Special Issue aims to collect excellent papers either considering a qualitative or a quantitative approach to the topics of macroeconomic stability, the stability of the financial system, or the activities undertaken by central banks and governments to achieve macroeconomic stability in the economy by influencing various variables such as the following: inflation, unemployment, economic growth dynamics, public deficit and debt, foreign debt, and others. Methodological approaches may include tools from the field of game theory, econometric models, simulation models, and others. The expected results of the research will allow for the development of various policy suggestions as well as societal implications.

Dr. Joanna Stawska
Prof. Dr. Paulo Reis Mourão
Guest Editors

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Economies is an international peer-reviewed open access monthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1800 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • macroeconomic policy
  • financial stability
  • monetary policy
  • fiscal policy
  • unemployment
  • GDP growth
  • inflation
  • current account

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Published Papers (4 papers)

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Research

22 pages, 1838 KiB  
Article
The Impact of Restrictive Macroprudential Policies through Borrower-Targeted Instruments on Income Inequality: Evidence from a Bayesian Approach
by Lindokuhle Talent Zungu and Lorraine Greyling
Economies 2024, 12(9), 256; https://doi.org/10.3390/economies12090256 - 23 Sep 2024
Viewed by 797
Abstract
This study used the panel data from 15 emerging markets to examine the impact of restrictive macroprudential policies on income inequality from 2000–2019 using Bayesian panel vector autoregression and Bayesian panel dynamics generalised method of moments models. The chosen models are suitable for [...] Read more.
This study used the panel data from 15 emerging markets to examine the impact of restrictive macroprudential policies on income inequality from 2000–2019 using Bayesian panel vector autoregression and Bayesian panel dynamics generalised method of moments models. The chosen models are suitable for addressing multiple entity dynamics, accommodating a wide range of variables, handling dense parameterisation, and optimising formativeness and heterogeneous individual-specific factors. The empirical analysis utilised various macroprudential policy proxies and income inequality measures. The results show that when the central banks tighten systems using macroprudential policy instruments to sticker debt-to-income and financial instruments for lower-income borrowers (the bottom 40% of the income distribution), they promote income inequality in these countries while reducing income inequality for high-income borrowers (the high 1 percent of the income distribution). The impact of loan-to-value ratios was found to be insignificant in these countries. Fiscal policy through government expenditure and economic development reduces income inequality, while money supply and oil-price shocks exacerbate it. The study suggests implementing a progressive debt-to-income (DTI) ratio system in emerging markets to address income inequality among lower-income borrowers. This would adjust DTI thresholds based on income brackets, allowing lenient credit access for lower-income borrowers while maintaining stricter limits for higher-income borrowers. This would improve financial stability and reduce income disparities. Additionally, targeted financial literacy programs and a petroleum-linked basic income program could be implemented to distribute oil revenue to lower-income households. A monetary supply stabilisation fund could also be established to maintain financial stability and prevent excessive inflation. Full article
(This article belongs to the Special Issue Monetary and Fiscal Economics in the Context of Macroeconomic Stability)
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24 pages, 1072 KiB  
Article
Econometric Analysis of South Africa’s Fiscal and Monetary Policy Effects on Economic Growth from 1980 to 2022
by Luyanda Majenge, Sakhile Mpungose and Simiso Msomi
Economies 2024, 12(9), 227; https://doi.org/10.3390/economies12090227 - 26 Aug 2024
Viewed by 1250
Abstract
This study examined South Africa’s economic growth rate from 1980 to 2022 through an econometric analysis of fiscal and monetary policies. The study sought to investigate the relationships between the economy’s growth rate and various fiscal and monetary policy variables, taking into account [...] Read more.
This study examined South Africa’s economic growth rate from 1980 to 2022 through an econometric analysis of fiscal and monetary policies. The study sought to investigate the relationships between the economy’s growth rate and various fiscal and monetary policy variables, taking into account different economic approaches such as Keynesian, monetarist, and Wagner’s perspectives. The methodology used consisted of data preparation, multiple unit root tests, Autoregressive Distributed Lag (ARDL) cointegration analysis, diagnostic tests, and pairwise Granger causality analysis. The empirical analysis found a long-term cointegration among the economic growth rate, government debt, expenditure, and revenue in fiscal policy, though government debt and expenditure were not statistically significant. Contrary to economic theory, increased government revenue had a negative correlation with economic growth. There was no long-term relationship found between the economic growth rate and monetary policy variables such as the official exchange rate, inflation rate, real interest rates, and M3 money supply. Pairwise Granger causality tests revealed a one-way relationship between government spending and economic growth, providing support to the Keynesian approach to fiscal policy. This study also discovered evidence that economic growth Granger-causes inflation, implying that economic growth may have predictive power for inflation, consistent with the demand-pull inflation hypothesis. However, no direct predictive relationships were found between the selected monetary policy variables and economic growth, supporting the long-run theory of monetary neutrality. This study suggests evaluating spending, managing inflation, implementing reforms, closing infrastructure gaps, encouraging investment, and ensuring fiscal sustainability. Full article
(This article belongs to the Special Issue Monetary and Fiscal Economics in the Context of Macroeconomic Stability)
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27 pages, 347 KiB  
Article
Financial Development, Monetary Policy, and the Monetary Transmission Mechanism—An Asymmetric ARDL Analysis
by Olajide O. Oyadeyi
Economies 2024, 12(8), 191; https://doi.org/10.3390/economies12080191 - 24 Jul 2024
Viewed by 1209
Abstract
This paper’s objective is to examine the asymmetric cointegration and asymmetric effects of financial development and monetary policy on monetary transmission mechanisms in the Nigerian context using annual data spanning the period from 1986 to 2023. This study pushes the frontiers of knowledge [...] Read more.
This paper’s objective is to examine the asymmetric cointegration and asymmetric effects of financial development and monetary policy on monetary transmission mechanisms in the Nigerian context using annual data spanning the period from 1986 to 2023. This study pushes the frontiers of knowledge by providing information on the nonlinear impacts of monetary policy and financial sector innovations on monetary transmission mechanisms in Nigeria to help policymakers tailor their strategies to local conditions, enhancing the effectiveness of monetary interventions in the economy. To achieve this, this paper adopted nonlinear ARDL models to understand how changes in the direction of monetary policy and developments in the financial system induce changes in the transmission of monetary policy. The findings document the existence of asymmetries in both the short and long run, revealing that the impacts of financial development and monetary policy on the different monetary policy channels are not uniform. These asymmetries indicate that the responses of various economic variables to monetary policy actions differ depending on the level of financial development. These findings underscore the complexity of the monetary transmission mechanism and the necessity for a nuanced understanding of how financial development and monetary policy interact in different contexts. Consequently, this finding is symptomatic of some characteristics of those financial markets on their way toward advanced developments. As the financial system matures, monetary policy may have a greater impact on the cost of short-term funding for banks without having any discernible effect on the rates at which businesses and households access funding. Therefore, this paper recommends focusing on the policies that will foster the financial system across the banking sector, capital market, bond market, and overall financial sector to improve the efficiency of the monetary transmission process. Full article
(This article belongs to the Special Issue Monetary and Fiscal Economics in the Context of Macroeconomic Stability)
20 pages, 528 KiB  
Article
Should Monetary Policy in South Africa Lean against the Wind by Targeting the Financial Cycle?
by Malibongwe Cyprian Nyati
Economies 2024, 12(6), 145; https://doi.org/10.3390/economies12060145 - 11 Jun 2024
Viewed by 924
Abstract
Recently, several studies have argued about the interactions of the real economy and financial system, as well as the importance of financial cycles in business cycle fluctuations. To date, there exists near consensus among central bankers, economists, and other scholars that the financial [...] Read more.
Recently, several studies have argued about the interactions of the real economy and financial system, as well as the importance of financial cycles in business cycle fluctuations. To date, there exists near consensus among central bankers, economists, and other scholars that the financial cycle is an important source of business cycle fluctuations. This has raised the question of whether monetary policy should respond to financial instability and/or imbalances. As a result, we asked the following questions: Should monetary policy lean against the wind by targeting the aggregate financial cycle in South Africa? And what is the role of monetary policy in minimizing financial imbalances and instabilities in South Africa? The present article aims to provide answers to the above-mentioned question. Through the adoption of a multiple-equation generalized method of moments and structural vector autoregressive approaches, this article simultaneously estimates and compares both the finance-augmented and the conventional Taylor rules. It is shown that the South African Reserve Bank has considered developments in the aggregate financial cycle in setting its policy rate. Overall, there is clear evidence to conclude that the South African Reserve Bank can lean against the wind by targeting the aggregate financial cycle, but only as a genuine augmentation not as a fully flagged objective. This article adds new evidence to the South African literature on the prevailing debate of whether monetary policy should respond to developments in the financial system. Full article
(This article belongs to the Special Issue Monetary and Fiscal Economics in the Context of Macroeconomic Stability)
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