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Sources of difficulties in coordination of monetary and fiscal policies in the European Economic and Monetary Union

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  • Ignacy Święcicki
  • Jan J. Michałek

Abstract

The article analyses interaction of monetary policy of the European Central Bank and fiscal policies of the 12 first members of the Eurozone. The actual conduct of these economic policies from 1999 to 2008 has been assessed. We are using different versions of the Taylor rule to assess the stance of monetary policy, and cyclically adjusted fiscal deficit to assess the stance of fiscal policies. The analysis has been conducted on historical data, which were available to decision makers at the moment when the decisions had been made. We are pointing to the major discrepancies between the outcomes of theoretical models of a monetary union and the actual observed outcome and also to the possible explanations of this situation – divergent economic cycles and structural differences between European economies.

Suggested Citation

  • Ignacy Święcicki & Jan J. Michałek, 2014. "Sources of difficulties in coordination of monetary and fiscal policies in the European Economic and Monetary Union," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 39.
  • Handle: RePEc:eko:ekoeko:39_147
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    File URL: http://ekonomia.wne.uw.edu.pl/ekonomia/getFile/752
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    References listed on IDEAS

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