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Does monetary cooperation or confrontation lead to successful fiscal consolidation?

Author

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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.

Suggested Citation

  • Hellebrandt, T. & Posen, A.S. & Tolle, M., 2012. "Does monetary cooperation or confrontation lead to successful fiscal consolidation?," Financial Stability Review, Banque de France, issue 16, pages 131-142, April.
  • Handle: RePEc:bfr:fisrev:2011:16:12
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    References listed on IDEAS

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    1. William D. Nordhaus, 1994. "Policy games: Coordination and Independece in Monetary and Fiscal Policies," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 139-216.
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    Cited by:

    1. Sergey Pekarski, 2017. "Tight Money and the Sustainability of Public Debt," International Journal of Central Banking, International Journal of Central Banking, vol. 13(1), pages 191-223, February.

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