BOP Adjustments through Monetary and Fiscal Policy Coordination

BOP Adjustments through Monetary and Fiscal Policy Coordination

Dr. Kiran Kumar M, P R Krsan, Adit Harish, Nishok A

Assistant Professor – Finance, MBA Student of Finance, MBA Student of Finance, MBA Student of Finance Faculty of Management Studies, CMS Business School, Jain (Deemed-to-be University), Bengaluru, Karnataka - 560009

Kiranm287@gmail.com, pr_krsan23@cms.ac.in, adit_harish23@cms.ac.in, nishok_a23@cms.ac.in

Abstract

Balance of Payments (BOP) adjustments play a crucial role in maintaining economic stability, particularly in developing economies facing external imbalances. This study investigates the use of fiscal and monetary policy coordination as a successful tactic for reaching BOP equilibrium.

By integrating fiscal stimulus with monetary policy adjustments, governments can enhance their capacity to address trade deficits and capital account vulnerabilities. The study reviews existing literature from peer-reviewed journals, highlighting case studies where coordinated policies have successfully mitigated external shocks. Evidence indicates that coordinated approaches not only improve BOP positions but also foster overall economic growth by stabilizing inflation and exchange rates. Moreover, the research underscores the importance of institutional frameworks that support policy coherence, facilitating timely responses to external economic changes. Ultimately, the findings suggest that a synergistic relationship between fiscal and monetary policies can significantly contribute to sustainable BOP adjustments.

Keywords: Balance of Payments, Monetary Policy, Fiscal Policy, Economic Stability, Policy Coordination, External Imbalances.