The paper addresses macroeconomic policy interrelations and future conflicts, and offers an empirical study of monetary and fiscal policy interactions in the Czech Republic. In the event of a significant adverse shock, the optimal combination of macroeconomic policies should promote social and economic welfare and ensure the smooth operation of the economy. One instance of such a condition may be the current global COVID-19 pandemic. While policy-consistent steps against the immediate effects of the crisis are important, the value of policy coordination in the aftermath of the acute period of the recession should also be taken into account. There is also evidence of changes in policy behaviour over time. To this end, a six-variable Bayesian VAR is built and estimated and some refinements are proposed to the modelling system. The results point to the lack of complementarity between policy measures taken by the authorities and indicate that there is still ample space for economic policies to be more successful. In times of severe economic crisis, such as the current COVID-19 pandemic, better coordination between macroeconomic policies is especially needed. A comprehensive study of their contribution to the stabilisation of the economy at various stages of the business cycle, however, is necessary and could be a focus of future research.
Department of Economic and Social Policy, Faculty of Economics, University of Economics, Prague, W. Churchill sq. 4, 130 67 Praha 3, Czech Republic.
Department of System Analysis, Faculty of Informatics and Statistics, University of Economics, Prague, W. Churchill sq. 4, 130 67 Praha 3, Czech Republic.
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