Synergies between monetary policy and national policies in a monetary union

This article analyses, in the context of a monetary union, the existence of positive synergies between a monetary policy geared towards keeping interest rates low for a relatively prolonged period and demand and supply-side stimulus measures implemented by national authorities.1 For this purpose, various exercises are carried out using a macroeconomic model that reproduces a context of persistently low inflation in a monetary union, with nominal interest rates constrained by an effective lower bound, like the one that currently characterises the euro area. The analysis conducted suggests that national stimulation policies (such as fiscal expansions in those members of the union with scope for them and structural reforms in those with less efficient markets) have greater expansionary effects on economic activity and inflation in the short and medium term when, in parallel, the common central bank applies an expansionary monetary policy to keep interest rates low for an extended period.