Macroeconomic Stabilization, Monetary-Fiscal Interactions, and Europe's Monetary Union

28 Pages Posted: 3 Feb 2017

See all articles by Giancarlo Corsetti

Giancarlo Corsetti

University of Cambridge; University of Rome III - Department of Economics; Centre for Economic Policy Research (CEPR)

Luca Dedola

Bank of Italy; European Central Bank (ECB)

Marek Jarocinski

European Central Bank (ECB)

Bartosz Maćkowiak

European Central Bank (ECB)

Sebastian Schmidt

European Central Bank (ECB)

Multiple version iconThere are 2 versions of this paper

Date Written: December 15, 2016

Abstract

The euro area has been experiencing a prolonged period of weak economic activity and very low inflation. This paper reviews models of business cycle stabilization with an eye to formulating lessons for policy in the euro area. According to standard models, after a large recessionary shock accommodative monetary and fiscal policy together may be necessary to stabilize economic activity and inflation. The paper describes practical ways for the euro area to be able to implement an effective monetary-fiscal policy mix.

Keywords: Lower Bound on Nominal Interest Rates, Self-fulfilling Sovereign Default, Eurobond, Government Bonds, Joint Analysis of Fiscal and Monetary Policy

JEL Classification: E31, E62, E63

Suggested Citation

Corsetti, Giancarlo and Dedola, Luca and Jarocinski, Marek and Maćkowiak, Bartosz and Schmidt, Sebastian, Macroeconomic Stabilization, Monetary-Fiscal Interactions, and Europe's Monetary Union (December 15, 2016). ECB Working Paper No. 1988. Available at SSRN: https://ssrn.com/abstract=2910881

Giancarlo Corsetti (Contact Author)

University of Cambridge ( email )

University of Rome III - Department of Economics ( email )

via Ostiense 139
Rome, 00154
Italy
+39 06 5737 4056 (Phone)
+39 06 5737 4093 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Luca Dedola

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Marek Jarocinski

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
+49 69 1344 6414 (Phone)

Bartosz Maćkowiak

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Sebastian Schmidt

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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