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The Euro Area Periphery Sovereigns' Fiscal Positions and Unconventional Monetary Policy

Oliver Hülsewig and Johann Scharler

No 8041, CESifo Working Paper Series from CESifo

Abstract: We explore the reaction of the euro area periphery sovereigns’ fiscal positions to an unconventional monetary policy shock. We estimate panel vector autoregressive (VAR) models over the period 2010-2018, and identify the shock by imposing sign restrictions. Our results suggest that the sovereigns’ fiscal positions improve in response to the economic expansion induced by an expansionary non-standard monetary policy innovation which lowers sovereign CDS spreads. Moreover, we observe that fiscal discipline is maintained rather than undermined.

Keywords: euro area periphery sovereigns; fiscal position; unconventional monetary policy; panel vector autoregressive model (search for similar items in EconPapers)
JEL-codes: E52 E62 H62 H63 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
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