Monetary/fiscal policy dominance and conflicts. Evidence from crises

We estimate a system of fiscal and monetary policy rules with Markov-switching interaction regimes to study policy coordination and conflict in the United States and the Euro Area during the Global Financial Crisis and the COVID-19 crisis. In the United States, we find shifts between policy coordination regimes, with both crises occurring under fiscal dominance. In contrast, the Euro Area displays persistent monetary dominance, despite temporary crisis-induced deviations. A country-level analysis shows that Germany follows the aggregate Euro Area pattern, while France and Italy exhibit policy conflict regimes, reflecting heterogeneity within the monetary union.