Monetary-Fiscal Interactions and the Euro Area's Malaise

Marek Jarociński and Bartosz Maćkowiak

No 23746, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: When monetary and fiscal policy are conducted as in the euro area, output, inflation, and government bond default premia are indeterminate according to a standard general equilibrium model with sticky prices extended to include defaultable public debt. With sunspots, the model mimics the recent euro area data. We specify an alternative configuration of monetary and fiscal policy, with a non-defaultable eurobond. If this policy arrangement had been in place since the onset of the Great Recession, output could have been much higher than in the data with inflation in line with the ECB's objective.

JEL-codes: E31 E32 E63 (search for similar items in EconPapers)
Date: 2017-08
New Economics Papers: this item is included in nep-cba, nep-dge, nep-eec, nep-mac and nep-mon
Note: IFM ME POL
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Citations: View citations in EconPapers (2)

Published as Marek Jarociński & Bartosz Maćkowiak, 2017. "Monetary-Fiscal Interactions and the Euro Area’s Malaise," Journal of International Economics, .

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Journal Article: Monetary-fiscal interactions and the euro area's malaise (2018)
Chapter: Monetary-Fiscal Interactions and the Euro Area’s Malaise (2017)
Working Paper: Monetary-Fiscal Interactions and the Euro Area's Malaise (2017)
Working Paper: Monetary-fiscal interactions and the euro area's malaise (2017)
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