Monetary and Fiscal Responses during the Financial Crisis in the Developing and Emerging Economies

The study provides empirical analyses of the role of monetary and fiscal policy on economic growth during the financial crisis in developing and emerging economies. I investigate 72 episodes of financial crisis in developing and emerging countries, in order to assess the effect of monetary and fiscal policy on output cost over the financial crisis. I find out that effect of monetary and fiscal tightening will increase output cost during the financial crisis. The results show that fiscal policy has been more effective tools in dealing with financial crisis, than the effect of monetary policy. In addition, the result suggests that the coordination with an expansionary fiscal policy and a neutral monetary policy will reduce output cost during the financial crisis in developing and emerging countries