Sovereign debt crisis, fiscal consolidation, and active central bankers in a monetary union

Paolo Canofari, Giovanni Di Bartolomeo () and Marcello Messori

wp.comunite from Department of Communication, University of Teramo

Abstract: This paper examines the impact of exogenous shocks on sovereign debts in an incomplete monetary union. We assume that financial stability is a public good that sovereign debt shocks can undermine in fragile (peripheral) members. Our model shows that, unlike the common misconception, active monetary policies do not induce the peripheral government to relax its fiscal constraints; on the contrary, these policies tend to incentivize fiscal discipline by reducing the cost of balance consolidation. Active monetary policies, in fact, partially reallocate the stabilization costs from the periphery to the core of the union, preserving the common good and facilitating fiscal discipline in the periphery.

Date: 2022-10
New Economics Papers: this item is included in nep-cba, nep-mon and nep-opm
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.dipecodir.it/wpcom/data/wp_no_152_2022.pdf (application/pdf)

Related works:
Journal Article: Sovereign Debt Crisis, Fiscal Consolidation, and Active Central Bankers in a Monetary Union (2023)
Working Paper: Sovereign debt crisis, fiscal consolidation, and active central bankers in a monetary union (2021)
Working Paper: Sovereign debt crisis, fiscal consolidation, and active central bankers in a monetary union (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ter:wpaper:00152

Access Statistics for this paper

More papers in wp.comunite from Department of Communication, University of Teramo
Bibliographic data for series maintained by Giovanni Di Bartolomeo ().