We investigate U.S. monetary and fiscal policy regime interactions in a model, where regimes are determined by latent autoregressive policy factors with endogenous feedback. Policy regimes interact strongly: shocks that switch one policy from active to passive tend to induce the other policy to switch from passive to active, consistently with existence of a unique equilibrium, though both policies are active and government debt grows rapidly in some periods. We observe relatively strong

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... ions between monetary and fiscal policy regimes after the recent financial crisis. Finally, latent policy regime factors exhibit patterns of correlation with macroeconomic time series, suggesting that policy regime change is endogenous. JEL Classification: C13, C32, C38, E52, E58, E63 Key words and phrases: monetary and fiscal policy interactions, endogenous regime switching, adaptive LASSO, time-varying coefficient VAR, factor augmented VAR. * We are very grateful to Eric M. Leeper for many insightful comments which significantly improved earlier versions of the paper, and also to