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The ECB is running out of policy space: can fiscal policy help?

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  • Angela Capolongo
  • Daniel Gros

Abstract

The European Central Bank is running out of instruments for addressing persistent low inflation. In this paper, we assess if a fiscal policy expansion could help the ECB reaching its target. Using ten mainstream models, we find only a modest and temporary impact of a fiscal deficit of 1% of GDP on inflation.

Suggested Citation

  • Angela Capolongo & Daniel Gros, 2020. "The ECB is running out of policy space: can fiscal policy help?," Economics and Business Letters, Oviedo University Press, vol. 9(3), pages 216-220.
    • Handle: RePEc:ove:journl:aid:14674
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    File URL: https://reunido.uniovi.es/index.php/EBL/article/view/14674
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    1. Edoardo Beretta & Doris Neuberger, 2023. "Monetary aggregates in the US since 2020 and post-COVID-19 inflation: evidence from the equation of exchange," Economics and Business Letters, Oviedo University Press, vol. 12(4), pages 321-330.

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