- 2022. Monetary Policy Rule, Exchange Rate Regime, and Fiscal Policy Cyclicality in a Developing Oil Economy. Energy Economics, 112 (Article 106126), 1-13.
- 2022. Optimal Public Investment in Resource-Rich Low-Income Countries. Journal of African Economies, 31(1), 75-93.
- Monetary and Fiscal Policy Interactions in an Emerging Open Economy with High Foreign and Public Debt
Since the 2008 crisis, rising fiscal debt globally has renewed interest in the interaction between monetary and fiscal policy. This study constructs a macroeconomic model of joint fiscal and monetary policies for an emerging open economy, incorporating its structural specifics: two monetary instruments -- interest rate, to target inflation, and foreign exchange interventions, to manage the exchange rate, two fiscal instruments -- public consumption and public investment, two types of households -- forward-looking optimizers and liquidity-constrained consumers, and foreign debt via a collateral constraint. Parameters are calibrated for Hungary as an emerging small open economy with its high private foreign debt and public debt. The results show that the collateral constraint changes the transmission mechanisms of fiscal, monetary, foreign demand, and productivity shocks, making most variables volatile due to a shadow value of foreign debt, which additionally appears in the uncovered interest parity condition and affects the domestic interest rate.
Earlier Research:
- Worked on a macro-econometric model KMOD with Professor David Kemme and analysts at the National Bank of Kazakhstan, 2007-2008
- Fiscal/Oil Dominance, Inflation, and Policy Coordination [in Kazakh and Russian]. Economic Review of the National Bank of Kazakhstan, 2010, 2, 1-9
Fiscal dominance is related to the fiscal theory of the price level, stating that fiscal deficit causes an increase of prices due to a budget constraint which holds in equilibrium. This paper empirically finds that Kazakhstan, as an oil exporting economy, has fiscal dominance due to an existence of the cointegration relationship between fiscal debt and non-oil primary fiscal balance: 1% increase of debt leads, on average, to about 5.9 bln tenge fall in non-oil primary balance. Second, there is a cointegration relationship between aggregate consumption expenditures and non-oil primary balance: 1% increase of consumption leads, on average, to about 1.82 bln tenge fall in non-oil primary balance. Consumption growth, in turn, Granger causes inflation, suggesting demand-pull inflation in the economy. Third, there is a strong cointegration relationship between non-oil primary balance and oil revenues, which are transfers from the SWF to the government budget: an increase of non-oil primary surplus by 1 bln tenge leads, on average, to about 720.2 mln tenge fall in the oil revenues of government budget. In other words, non-oil fiscal deficit is financed by the discretionary transfers from SWF. The limitation of this study, however, is short time series (2000Q1-2009Q3), as oil revenues of government budget were not separated from total fiscal revenues prior to 2000Q1 in public finance statistics. The policy implications might be to follow a well-defined fiscal policy rule in order to avoid excessive expansion and fiscal unsustainability, promote an effective coordination between monetary and fiscal authorities to achieve price stability, and a transparent use of SWF for productive public investment projects.
- Master Thesis at the National Graduate Institute for Policy Studies (GRIPS, Tokyo): "Inflation Consequences of Dutch Disease in Kazakhstan: The Case for Prudent Fiscal Policy". East-West Study (South Korea), 2006, 18(2), 191-222
