The effects of fiscal spending shocks on the performance of simple monetary policy rules

► We examine the effects of fiscal spending shocks on the performance of monetary policy rules. ► We model the interaction between fiscal and monetary policy using a small dynamic general equilibrium model. ► Flexible inflation targeting appears to be preferred policy in response to fiscal shocks. ► Flexible inflation targeting rules also perform relatively better in response to technological shocks in our model as well. ► Comparisons based on simulations and utility substantiate these findings.