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Monetary-fiscal crosswinds in the European Monetary Union
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Reichlin, Lucrezia, Ricco, Giovanni and Tarbé, Matthieu (2022) Monetary-fiscal crosswinds in the European Monetary Union. Working Paper. Coventry, UK: University of Warwick. Department of Economics. Warwick economics research papers series (WERPS) (1432). (Unpublished)
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Official URL: https://warwick.ac.uk/fac/soc/economics/research/w...
Abstract
We study the monetary-fiscal mix in the European Monetary Union. The medium and long-run effects of conventional and unconventional monetary policy are analysed by combining monetary policy shocks identified in a Structural VAR, and the general government budget constraint featuring a single central bank and multiple fiscal authorities. In response to a conventional easing of the policy rate, the cumulated response of the fiscal deficit is positive. Conversely, in response to an unconventional easing affecting the long end of the yield curve, the primary fiscal position barely moves. This is consistent with the long-run effect of unconventional monetary easing on the price index, which is about half that of conventional easing. The aggregate long-run cumulated surplus is mainly driven by Germany’s fiscal policy during the period in which unconventional monetary policy was adopted.
Item Type: | Working or Discussion Paper (Working Paper) | ||||
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Subjects: | H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance H Social Sciences > HJ Public Finance |
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Divisions: | Faculty of Social Sciences > Economics | ||||
Library of Congress Subject Headings (LCSH): | Economic and Monetary Union, European Union, Monetary unions -- European Union countries, Monetary policy -- European Union countries, Europe -- Economic integration, Fiscal policy -- European Union countries | ||||
Series Name: | Warwick economics research papers series (WERPS) | ||||
Publisher: | University of Warwick. Department of Economics | ||||
Place of Publication: | Coventry, UK | ||||
ISSN: | 0083-7350 | ||||
Official Date: | 26 October 2022 | ||||
Dates: |
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Number: | 1432 | ||||
Number of Pages: | 68 | ||||
Institution: | University of Warwick | ||||
Status: | Not Peer Reviewed | ||||
Publication Status: | Unpublished | ||||
Access rights to Published version: | Open Access (Creative Commons) | ||||
Description: | |||||
Date of first compliant deposit: | 14 November 2022 | ||||
Date of first compliant Open Access: | 15 November 2022 |
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