Euro Area Periphery Countries' Fiscal Policy and Monetary Policy Surprises

Oliver Hülsewig and Horst Rottmann

Oxford Bulletin of Economics and Statistics, 2022, vol. 84, issue 3, 544-568

Abstract: We estimate local projections to explore how fiscal policy in euro area periphery countries responds to monetary policy shocks that lower sovereign bond yields. In particular, we assess whether the disciplining effect of financial markets on public finances is undermined by the ability of monetary policy to affect the conditions of external funds. We find that the fiscal balance, on average, improves in response to monetary policy surprises that bring down yields on sovereign bonds.

Date: 2022
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https://doi.org/10.1111/obes.12486

Related works:
Working Paper: Euro area periphery countries' fiscal policy and monetary policy surprises (2021)
Working Paper: Euro Area Periphery Countries' Fiscal Policy and Monetary Policy Surprises (2020)
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