Positive Effects of a Decentralized Fiscal Expansion in the European Monetary Union

Rosaria Rita Canale

Journal of Economic Issues, 2008, vol. 42, issue 3, 787-802

Abstract: This paper aims to show how state intervention within the European Monetary Union can have positive effects not only on growth but also on public balances and debt. The relation between centralized monetary policy and decentralized fiscal policy partly solves the lack of coordination between the two. Each time a fiscal expansion in an EU country is not accompanied by a Central Bank interest rate increase, the expansionary effect of public spending, initially financed through the emission of public bonds, will be reinforced by endogenous money creation due to the increase in growth. The final result, if growth exceeds the rate of interest, is not only an increase in equilibrium income, but also a reduction in debt.

Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1080/00213624.2008.11507179 (text/html)
Access to full text is restricted to subscribers.

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:mes:jeciss:v:42:y:2008:i:3:p:787-802

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MJEI20

DOI: 10.1080/00213624.2008.11507179

Access Statistics for this article

More articles in Journal of Economic Issues from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().