Coordination of state fiscal and monetary policy the in the context of post-conflict recovery

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    Tuesday, 11 July 2017
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    Volume 1 2017, Issue #2, pp. 19-28
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The article is devoted to the study of fiscal and monetary components of state`s financial policy and their coordination after the completion of hostilities. The urgency of the topic is determined by the need to find an optimal (in terms of economic system) strategy of interaction between the government and the central bank in the conditions of post-conflict recovery. The purpose of the article is to summarize the world experience of formation of fiscal and monetary policy as well as their coordination in order to effectively overcome the consequences of military conflicts. The author analyzes the data on the post-war development of 12 countries that succeeded in restoring their national economies during the first decade after the end of hostilities (Angola, Cambodia, the Republic of Congo, Croatia, Georgia, Indonesia, Liberia, Macedonia, Serbia, Sierra Leone, Solomon Islands, Tajikistan) As a result, the author discovers a gradual transition from the fixed and regulated exchange rate regime to the floating exchange rate in the long-term perspective, reduction of inflation and interest rates on loans, as well as a gradual increase of GDP and the net inflow of foreign direct investments, while the share of tax revenues and public expenditures in GDP remained stable. On the basis of generalization of the world experience the conclusion was made about the key role of central banks in ensuring economic growth in the context of post-conflict recovery by ensuring price stability and stimulating lending. In addition, the importance of geographic location and availability of natural resources in the restoration of the national economy of some countries was emphasized.

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    • Figure 1. Key measures of fiscal and monetary policy in post-conflict recovery
    • Figure 2. Some provisions of successful post-conflict economic recovery in the sphere of monetary and fiscal policies
    • Figure 3. Tax revenue, % of GDP
    • Figure 4. The matrix of interaction between government and central bank
    • Table 1. Macroeconomic indicators of conflict economies according to exchange rate systems
    • Table 2. Official exchange rate, local currency per US dollar
    • Table 3. Inflation (consumer prices), annual %
    • Table 4. Lending interest rate, %
    • Table 5. Domestic credit provided by financial sector, % of GDP
    • Table 6. GDP growth, annual %
    • Table 7. Foreign direct investment (net inflows), % of GDP
    • Table 8. Government expense, % of GDP
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