Fiscal Policy and Monetary Policy: Sensitivity Analysis

Abstract

Economic policy focuses on the management of macroeconomic stability, fiscal policy will interact with monetary policy to control macroeconomic balance. The purpose of this study is to analyze the fiscal and monetary policy to gross domestic product. The sensitivity analysis was performed to explain the change of policy shocks on macroeconomic indicators. The analysis method in this research is using error correction model of Engle Granger (ECM-EG), which estimates the short-term and Two Stages Least Square for the long term estimates