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Does monetary cooperation or confrontation lead to successful fiscal consolidation?

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  • Hellebrandt, T.
  • Posen, A.S.
  • Tolle, M.

Abstract

Accommodation of fiscal authorities by monetary policy is controversial, as can be seen in current euro area discussions. Some go further and suggest that confrontational enforcement by central banks taking a hard line on adjustment is critical to inducing longer-term fiscal stabilisation. Others suggest that fiscal commitment must come first. This article steps back to look at the historical record of central bank behaviour vis-à-vis fiscal authorities, at least until the current crisis period, and whether cooperative approaches ahead of consolidations have proven as dangerous as some would suggest.

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File URL: http://www.banque-france.fr/fileadmin/user_upload/banque_de_france/publications/Revue_de_la_stabilite_financiere/2012/rsf-avril-2012/FSR16-article-12.pdf
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Bibliographic Info

Article provided by Banque de France in its journal Financial Stability Review.

Volume (Year): (2012)
Issue (Month): 16 (April)
Pages: 131-142

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Handle: RePEc:bfr:fisrev:2011:16:12

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Postal: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
Web page: http://www.banque-france.fr/
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  1. Antonio Fatás & Ilian Mihov, 2009. "Why Fiscal Stimulus is Likely to Work," International Finance, Wiley Blackwell, vol. 12(1), pages 57-73, 05.
  2. Avinash Dixit & Luisa Lambertini, 2003. "Interactions of Commitment and Discretion in Monetary and Fiscal Policies," Boston College Working Papers in Economics 575, Boston College Department of Economics.
  3. C. Fred Bergsten & Jacob Funk Kirkegaard, 2012. "The Coming Resolution of the European Crisis," Policy Briefs PB12-1, Peterson Institute for International Economics.
  4. Alan J. Auerbach & William G. Gale & Benjamin H. Harris, 2010. "Activist Fiscal Policy," Journal of Economic Perspectives, American Economic Association, vol. 24(4), pages 141-64, Fall.
  5. Kenneth N. Kuttner, 2001. "Beyond Bipolar: A Three-Dimensional Assessment of Monetary Frameworks," Working Papers 52, Oesterreichische Nationalbank (Austrian Central Bank).
  6. Jean-François Segalotto & Marco Arnone & Bernard Laurens, 2006. "Measures of Central Bank Autonomy," IMF Working Papers 06/228, International Monetary Fund.
  7. Andrea Pescatori & Daniel Leigh & Jaime Guajardo & Pete Devries, 2011. "A New Action-Based Dataset of Fiscal Consolidation," IMF Working Papers 11/128, International Monetary Fund.
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