Analysis of the Impact of Coordinated Monetary and Fiscal Policies on Macroeconomic Stability

Abstract

This article focuses on the influence of the coordination of monetary policy and fiscal policy on macroeconomic stability. Under the complicated economic situation, the coordination of the two major policies is crucial to maintaining economic stability. By constructing a multiple linear regression model, this article selects a number of data covering the growth rate of money supply and fiscal expenditure from 2010 to 2022, and analyzes the influence of policies on economic growth, price and employment stability. The empirical results show that monetary policy and fiscal policy have significant effects on all aspects of macroeconomic stability, and their coordination has synergistic effect. However, there are also problems in policy coordination, such as target conflict, time lag difference and poor transmission. For example, during the period of 2010-2022, the change of inflation rate and gross domestic product (GDP) growth rate shows that there is a potential conflict in policy objectives, and the time difference between monetary policy and fiscal policy adjustment on economic indicators is 3-5 months on average. Therefore, it is of great significance to optimize the policy coordination mechanism and improve the scientificity and transmission effect of policy formulation to enhance macroeconomic stability.