Macroeconomic Stabilization, Monetary-Fiscal Interactions, and Europe’s Monetary Union

Bartosz Maćkowiak, Giancarlo Corsetti, Luca Dedola, Sebastian Schmidt and Marek Jarociński

No 12371, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: The euro area recently experienced a prolonged period of weak economic activity and very low inflation. This paper reviews models of business cycle stabilization with an eye to formulating lessons for policy in the euro area. According to standard models, after a large recessionary shock accommodative monetary and fiscal policy together may be necessary to stabilize economic activity and inflation. The paper describes practical ways for the euro area to be able to implement an effective monetary-fiscal policy mix.

Keywords: Lower bound on nominal interest rates; Self-fulfilling sovereign default; Eurobond; Government bonds; Joint analysis of fiscal and monetary policy (search for similar items in EconPapers)
JEL-codes: E31 E62 E63 (search for similar items in EconPapers)
Date: 2017-10
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac, nep-mon and nep-opm
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Citations: View citations in EconPapers (1)

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