Surfing the Epidemic at the Zero Lower Bound: A Eurozone Fiscal Era?

Esteban Cruz-Hidalgo (), José Francisco Rangel-Preciado () and Francisco Manuel Parejo-Moruno ()
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Esteban Cruz-Hidalgo: University of Extremadura
José Francisco Rangel-Preciado: University of Extremadura
Francisco Manuel Parejo-Moruno: University of Extremadura
Authors registered in the RePEc Author Service: Esteban Cruz Hidalgo, Francisco Manuel Parejo Moruno and José Francisco Rangel Preciado

A chapter in New Challenges for the Eurozone Governance, 2021, pp 137-151 from Springer

Abstract: Abstract The Global Financial Crisis has diluted the previous consensus on monetary policy. The disconnection of the Interest Rate Policy for macroeconomic management motivated by the permanence of the zero lower bound has forced central banks to make incursions into unexplored terrain. Right at this historic moment, the epidemic shock has hit the economy, causing a drop in activity unprecedented since World War II. The monetary authorities are once again pushed to advance cooperation between the Central Bank and the Treasury. This is an especially difficult exercise in the Eurozone, where the different levels of resilience of the member states divert macroeconomic issues into the moral arena. An effective way to redirect the discussion for macroeconomic stabilization is to focus the debate on the development and strengthening of automatic stabilizers, which would dispel the discretionary image of public spending. That is the objective of this chapter, and against this background we immerse ourselves in the debates on Functional Finance in the context of World War II to present an automatic mechanism fixed to a clear policy rule.

Keywords: Fiscal policy; Automatic stabilizers; Zero lower bound; Secular stagnation; Job guarantee (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-62372-2_7

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DOI: 10.1007/978-3-030-62372-2_7

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