United States, Japan, euro zone: Who leads in the game between the central bank and government?

When there is fiscal dominance, the government chooses an expansionary fiscal policy in the knowledge that the central bank will have to act to ensure fiscal solvency. The government’s choices therefore determine those of the central bank. But a situation of “monetary dominance” is also possible : the central bank chooses a monetary policy in the knowledge that the government then chooses its fiscal policy in such a way as to remain solvent (so fiscal policy becomes more expansionary the lower the interest rate). In this case, the central bank’s choices determine those of the government. When both fiscal and monetary policies are expansionary, it may therefore be because: Either monetary policy has reacted to the expansionary fiscal policy to ensure fiscal solvency; Or fiscal policy has reacted to the expansionary monetary policy, in such a way as to conduct the most expansionary fiscal policy possible while preserving fiscal solvency , given the level of interest rates chosen by the central bank. In the United States, the euro zone and Japan, we find there is: Both fiscal dominance and monetary dominance in the United States; Fiscal dominance in the euro zone and Japan.