Optimal monetary–fiscal policy in the euro area liquidity crisis

The terrorattack hit the western world in a situation of a sharp cyclical downturn in the USA, Europe and Japan. Mainly because of increased uncertainty the downturn will be intensified by the attack. Immediately after the attack US monetary and fiscal policy became even more expansive. In Europe monetary policy reacted very reluctantly. Active fiscal policy in the Euro-area is nearly not existing as the Stability and Growth Pact as well as neo-liberal ideology prevents fiscal measures. The inactive economic policy in the Euro-area is not only dangerous for Europe but also a depressing factor for the world economy.

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THE IMPACT OF THE MONETARY - FISCAL POLICY MIX ON INVESTMENTS OF EURO AREA COUNTRIES IN THE CONTEXT OF THE FINANCIAL CRISIS

Science and Studies of Accounting and Finance Problems and Perspectives ◽

10.15544/ssaf.2012.32 ◽

2012 ◽

Vol 8 (1) ◽

pp. 228-236

Author(s):

Joanna Stawska

Keyword(s):

Monetary Policy ◽

Fiscal Policy ◽

Financial Crisis ◽

Interest Rates ◽

Euro Area ◽

Debt Crisis ◽

Policy Mix ◽

Monetary Authorities ◽

Recent Financial Crisis ◽

The Impact

The study presents the impact of monetary-fiscal policy mix on economic growth, mainly for the investments of euro area in financial crisis. Fiscal policy and monetary policy play an important role in the economy, influencing each other and on a number of economic variables as well. In the face of the recent financial crisis, which turned into a debt crisis, fiscal and monetary authorities have been working together to revive economic activity. There was a significant economic impact on the level of government investments. The central bank kept interest rates at very low levels and used nonstandard instruments of monetary policy. Fiscal authorities have increased government spending to stimulate investment and economic recovery. The paper concludes that the management of the fiscal and monetary authorities in a crisis situation has been modified compared to the period before the crisis, when the coordination of these policies was clearly weaker.

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Fiscal Policy and Macroeconomic Stabilisation in the Euro Area: Possible Reforms of the Stability and Growth Pact and National Decision-Making Processes

Designing the European Model ◽

10.1057/9780230236653_7 ◽

2009 ◽

pp. 177-228

Author(s):

Seppo Honkapohja ◽

Frank Westermann

Keyword(s):

Decision Making ◽

Fiscal Policy ◽

Euro Area ◽

Stability And Growth Pact ◽

Growth Pact ◽

Decision Making Processes ◽

The Stability

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Market nerves roil Turkey and Central Europe

Emerald Expert Briefings ◽

10.1108/oxan-db216722 ◽

2016 ◽

Keyword(s):

Monetary Policy ◽

Fiscal Policy ◽

Financial Markets ◽

Central Europe ◽

Euro Area ◽

Inflection Point ◽

Oil Prices ◽

Oil Price ◽

Content Type ◽

Policy Guidance

Significance Markets have taken badly the Fed's more hawkish policy guidance for 2017, not expecting such a shift in monetary policy so soon. The shift in US monetary policy comes just as the ECB is preparing the ground for the gradual withdrawal of monetary stimulus. While Turkish assets are the most vulnerable partly because of the severe escalation in political risk, the Polish zloty is also at risk thanks mainly to its status as one of the most liquid EM currencies. Impacts Investors see global financial markets at an inflection point as monetary policy gives way to fiscal policy as the main source of stimulus. This monetary-to-fiscal shift will fuel uncertainty about the direction of asset prices. Rising oil prices will allay concerns about deflation in the euro-area. As major Emerging Europe currencies suffer, the ruble is rising against the dollar amid oil price rises and Trump’s Russia-friendly remarks.

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Renewed ECB easing places further pressure on banks

Emerald Expert Briefings ◽

10.1108/oxan-db247007 ◽

2019 ◽

Keyword(s):

Fiscal Policy ◽

Interest Rate ◽

Euro Area ◽

Economic Activity ◽

Commercial Banks ◽

Governing Council ◽

Monetary Policies ◽

Content Type ◽

Supervisory Authority ◽

Forward Guidance

Subject ECB easing. Significance The ECB’s Governing Council announced on September 12 another round of ultra-loose monetary policies. 'As long as necessary' has replaced 'whatever it takes' in departing ECB President Mario Draghi's speech. The lowering of the deposit facility rate for commercial banks from minus 0.40% to minus 0.50% will provide them with additional liquidity at favourable conditions. The ECB has also enhanced its forward guidance by linking future interest rate moves to the inflation outlook. Euro-area economic activity is deteriorating and inflation is far below the ECB’s target. Impacts Fear of losing customers is stopping banks charging negative rates on household deposits, but the debate about this will grow. However, an outright ban, as advocated by Germany’s Federal Financial Supervisory Authority, seems unlikely despite the risk of withdrawals. The ECB’s Governing Council urges that fiscal policy should be the main stimulus, but countries show no sign of coordinating on a package.

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