Economic crisis is usually characterized by a deep and prolonged recession. The two major tools for the governments to pull the nations out of the crisis are fiscal and monetary policies. However, fiscal policies must to not be perceived is isolation from monetary policies. A sound and strategic interaction between these two are the best way to get an economy out of the situation. Monetary strategy is frequently perceived as something of a ‘blunt strategy instrument’ – altering all sectors of the economy even though in disparate methods and alongside a variable impact. Fiscal strategy adjustments can to a degree be targeted to alter precise clusters (e.g. increases in means-tested benefits for low income households, reductions in the rate of firm tax for small-medium sized enterprises and extra kind investment allowances for companies in precise regions). However, empirical researchers are always divided in opinion whether fiscal and monetary policies are complement or substitutes in achieving sustainable macroeconomic goals. In order to achieve sustainable macroeconomic targets, fiscal and monetary authorities should act as strategic complements.
OBJECTIVE OF THE STUDY
The purpose of the study is to empirically analyze the policies, monetary and fiscal, taken during the times of recession, for several emerging countries in the world. This study considers eight countries, namely South Africa, Indonesia, Russia, Peru, Columbia, Malaysia, India and countries in Eastern Europe (considered together, due to lack of data). The study tries to provide evidence that in most of the cases, monetary and fiscal policies are not taken individually or only one of them are employed. Rather, it is the combination of both the policies that takes the countries out of recession. The data has been collected from the Website of Federal Reserve Bank of America, St. Louise’s website. It then focuses on the cases for the eight countries listed above and discusses their...