Coordination of monetary and fiscal policy

Abstract

To achieve price stability, coordination of monetary and fiscal polices is required. The importance of coordination results from such premises as understanding the interdependence between monetary and fiscal policy, the role of central bank independence, the instruments-targets relation and financial stability as well. The lack of coordination will result in inferior overall economic performance, whereas providing it will give a better outcome for both policymakers. Therefore, coordination may be treated as the necessary condition for achieving price stability. (original abstract)