Interaction of Economic Policy. Lessons on Social Welfare and Risk Premium

Abstract

The Purpose of this paper is to quantify the impacts on social welfare and risk premium, by combination and alternatives to interactions of economic policy: fiscal-monetary, fiscal-exchange and monetary for the Bolivian case. There are also considered unidirectional economic policies with counterfactual analysis without interaction. The estimates are presented by a Dynamic Stochastic General Equilibrium (DSGE) model with the incorporation of Bayesian structural autoregressive vectors (SVAR). The findings suggest that the fiscal-monetary interaction generates 79% of variability in social welfare, while the unidirectional exchange rate policy is a relevant factor for Risk premium of more than 84%. In the absence of economic policy interaction, productivity shocks are the most relevant.