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Fiscal Performance in Monetary Unions: How Much Austerity Should Be Allowed?

Carmen Díaz-Roldán Author-Email: Carmen.diazroldan@uclm.es
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Carmen Díaz-Roldán Author-Email: Carmen.diazroldan@uclm.es: University of Castilla-La Mancha, Department of Economics, Spain

Authors registered in the RePEc Author Service: Carmen Diaz-Roldan ()

Panoeconomicus, 2017, vol. 64, issue 1, 61-76

Abstract: The effectiveness of fiscal policy becomes particularly relevant in the case of the member countries of a monetary union facing a sovereign debt crisis. In that environment, fiscal policy is constrained by the need to carry out fiscal consolidation and reduce debt levels. For that reason and with the pur- pose of anchoring fiscal discipline, the adoption of fiscal rules has become a central issue. In this paper we will analyse the management of fiscal policies in monetary unions, when the central bank and the fiscal authorities follow policy rules. The results are related to the conservativeness of the central bank, the degree of austerity of the fiscal authorities and the initial level of public debt.

Keywords: Policy rules; Fiscal policy; Monetary unions (search for similar items in EconPapers)
JEL-codes: E63 H30 (search for similar items in EconPapers)
Date: 2017
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