The impact of fiscal and monetary policy on economic growth and cyclical development of the economy

Abstract

The existence of the cyclical development of the economy and searching for the effective fiscal and monetary policy as a tool to mitigate cyclical fluctuations will be for a long time a subject of many professional discussions. In particular, the crisis processes in the 21st century meant a renewal of the debate between Keynesian and monetarist oriented economists. The aim of the article is to compare and evaluate different approaches to the effective application of fiscal and monetary policy instruments and the possibility of their practical application. Many economists have come to the conclusion that the implementation of monetary policy leads to the more effective allocation of production resources as in the case of fiscal expansion. It is obvious that even in the future there will be controversy about whether the cause of cyclical fluctuations is incorrectly implemented economic policy or the failure of economic and political institutions.

Keywords

• cyclical development of the economy
• fiscal expansion
• monetary expansion