Monetary/fiscal policy regimes in post-war Europe

Othman Bouabdallah, Pascal Jacquinot and Valeria Patella

Macroeconomic Dynamics, 2026, vol. 30, -

Abstract: We analyse the monetary-fiscal policy mix in post-war Europe, focusing on France and Italy, to trace the historical dynamics of debt and inflation. Using a Markov-switching DSGE model, we identify distinct policy regimes: a Passive Monetary-Active Fiscal (PM/AF) regime before the late 1980s/early 1990s, an Active Monetary-Passive Fiscal (AM/PF) regime associated with central bank independence and EMU convergence, and a third regime marked by the ELB and active fiscal measures aimed at recovery. Simulations reveal that the PM/AF regime in France led to price volatility but stabilised debt, while AM/PF curbed inflation at the cost of rising debt. In contrast, Italy’s procyclical fiscal policy in downturns exacerbated imbalances, aggregate volatility, and low growth. We further assess the implications of policy credibility and uncertainty.

Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
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:cup:macdyn:v:30:y:2026:i::p:-_10

Access Statistics for this article

More articles in Macroeconomic Dynamics from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().