Shared Problem Shared Solution Benefits From Fiscal Monetary Interactions In The Euro Area
Download Shared Problem Shared Solution Benefits From Fiscal Monetary Interactions In The Euro Area PDF/ePub or read online books in Mobi eBooks. Click Download or Read Online button to get Shared Problem Shared Solution Benefits From Fiscal Monetary Interactions In The Euro Area book now. This website allows unlimited access to, at the time of writing, more than 1.5 million titles, including hundreds of thousands of titles in various foreign languages.
Shared Problem, Shared Solution: Benefits from Fiscal-Monetary Interactions in the Euro Area
Author: Robert C. M. Beyer
language: en
Publisher: International Monetary Fund
Release Date: 2023-07-21
This paper employs two established macroeconomic models to show that fiscal policy in the euro area can help monetary policy in reducing inflation. Specifically, a fiscal consolidation of 1 percent of GDP for two years and 0.5 percent in the third year across the euro area would ease the policy interest rate by 30-50 basis points relative to the baseline scenario, while lowering inflation. It would also put the public debt-to-GDP ratio on a downward path, with the output costs reversing after the second year. Additionally, a stronger fiscal contribution to the policy mix could mitigate financial fragmentation risks. In the current context of elevated inflation in all euro area economies, the findings suggest two key takeaways: first, synchronized fiscal and monetary policies offer gains even when monetary policy is unconstrained and, second, sharing the burden of lowering inflation through fiscal consolidation among euro area members is beneficial for union-wide inflation reduction, improving debt sustainability and inducing a lower policy rate path.
How Loose, How Tight? A Measure of Monetary and Fiscal Stance for the Euro Area
Author: Nicoletta Batini
language: en
Publisher: International Monetary Fund
Release Date: 2020-06-05
This paper builds a model-based dynamic monetary and fiscal conditions index (DMFCI) and uses it to examine the evolution of the joint stance of monetary and fiscal policies in the euro area (EA) and in its three largest member countries over the period 2007-2018. The index is based on the relative impacts of monetary and fiscal policy on demand using actual and simulated data from rich estimated models featuring also financial intermediaries and long-term government debt. The analysis highlights a short-lived fiscal expansion in the aftermath of the Global Financial Crisis, followed by a quick tightening, with monetary policy left to be the “only game in town” after 2013. Individual countries’ DMFCIs show that national policy stances did not always mirror the evolution of the aggregate stance at the EA level, due to heterogeneity in the fiscal stance.
Coordination of Monetary and Fiscal Policies
Author: International Monetary Fund
language: en
Publisher: International Monetary Fund
Release Date: 1998-03-01
Recently, monetary authorities have increasingly focused on implementing policies to ensure price stability and strengthen central bank independence. Simultaneously, in the fiscal area, market development has allowed public debt managers to focus more on cost minimization. This “divorce” of monetary and debt management functions in no way lessens the need for effective coordination of monetary and fiscal policy if overall economic performance is to be optimized and maintained in the long term. This paper analyzes these issues based on a review of the relevant literature and of country experiences from an institutional and operational perspective.