How do European Monetary and Fiscal Authorities Behave?
AbstractThe objective of this study is to investigate the behaviour of monetary and fiscal authorities in the Euro area. Our main contribution is joint modeling of behaviour of the two authorities. Our investigation highlights a number of facts. The systematic monetary policies adopted by the non-German authorities in the seventies were not capable of stabilizing inflation. Such results have been achieved in the eighties and the nineties by anchoring more tightly domestic monetary policy to German monetary policy. All the main episodes of expansionary fiscal policy which have occurred in the course of the eighties and the nineties in Europe cannot be explained by the systematic behaviour of fiscal authorities. Stabilization of inflation has been achieved independently from the lack of fiscal discipline. There are important interactions between the two authorities but they depend exclusively on the responses of governments expenditures and receipts to interest rate payments on the public debt.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3426.
Date of creation: Jun 2002
Date of revision:
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Other versions of this item:
- Carlo A. Favero, . "How do European monetary and fiscal authorities behave?," Working Papers 214, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-02-18 (All new papers)
- NEP-CBA-2003-02-18 (Central Banking)
- NEP-EEC-2003-02-18 (European Economics)
- NEP-MAC-2003-02-18 (Macroeconomics)
- NEP-MON-2003-02-18 (Monetary Economics)
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