Empirical evidence on the monetary-fiscal policy mix and macroeconomic (in)stability in the U.S.

This paper investigates the fiscal-monetary policy mix in the U.S. using econometric methods that are robust to weak instruments and exploit information in structural changes. We find that the post-WWII economy is mainly characterised by an active monetary-passive fiscal policy regime, though we cannot preclude the Fiscal Theory of the Price Level during the 1960s and ’70s owing to a passive monetary-active fiscal policy mix. Nevertheless, our findings suggest that self-fulfilling inflationary expectations and sunspot fluctuations, induced by a passive monetary-passive fiscal policy mix, can be ruled out as an explanation of the Great Inflation episode.

Liquidity Provision on Demand in the Argentine Banking System

In recent decades, liquidity provision on demand has experienced more growth than almost any other banking function. Banks have comparative advantages over other intermediaries for providing liquidity on demand because of their ability to raise funds through deposits. An overdraft facility is a product that provides liquidity on demand to firms and can affect investment levels. Using panel data for 70 Argentine banks between 1995 and 2015, we built an econometric model to analyze some determinants of the volume of bank-supplied overdrafts, focusing on the role of deposits. This article is focused on understanding how banks have financed their credit lines to firms and its evolution in the Argentinian banking system in the examined period. We found evidence of a strong relation between demand deposits and overdrafts supply. However, the features of this relationship are heterogeneous between different types of banks and were affected by the 2001 Crisis. This heterogeneity among banks could represent an inefficient liquidity provision.