The Impact of Monetary and Fiscal Policies on Real Output: A Re-examinationAli F Darrat, Kenneth A Tah* and Cedric L Mbanga
College of Business, Louisiana Tech University, Ruston, LA, 71272, USA
- *Corresponding Author:
- Kenneth A Tah
College of Business
Louisiana Tech University
Ruston, LA, 71272, USA
Fax: 318 257 4253
E-mail: [email protected]
Received date: December 12, 2013; Accepted date: May 08, 2014; Published date: May 14, 2014
Citation: AF Darrat, Kenneth AT, Cedric LM (2014) The Impact of Monetary and Fiscal Policies on Real Output: A Re-examination. Bus Econ J 5:97. doi: 10.4172/2151-6219.100097
Copyright: © 2014 Kenneth AT, et al. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
Research continues to investigate the relative efficacy of monetary and fiscal policies for stabilizing the US economy, a debate that began with Anderson and Jordan’s well-known study. This paper examines the contention of Senbet that monetary policy matters for stabilizing real economic activities; fiscal policy does not. We show that this claim is unfounded and apparently the outcome of prematurely dismissing fiscal policy from the cointegrating vector. In the context of a properly specified model, results we obtained from cointegration and error-correction tests using data and time period similar to Senbet’s consistently suggest that only fiscal policy Granger-causes real output over the long-run. Moreover both monetary and fiscal actions Granger-cause significant short-run effects on the real side of the economy.