Policy spillovers and synergies in a monetary union

Arbeitspapier

We provide a general equilibrium framework for analyzing the effects of supply and demand side policies, and the potential synergies between them, in an asymmetric monetary union that faces a liquidity trap and a slow deleveraging process in its ‘periphery‘. We find that the joint implementation of pro-competition structural reforms in the periphery, a fiscal expansion in the core, and forward guidance about the future path of nominal interest rates produces positive synergies between the three policies: forward guidance re-inforces the expansionary effects of country-specific policies, and the latter in turn improve the effectiveness of forward guidance. Our results provide a case for complementing current unconventional monetary stimuli in the euro area with national efforts on the structural reform and fiscal fronts.

Object Details

• ISBN: 978-92-899-2190-9
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 1942

Classification and Topics

• Classification: Wirtschaft ; Financial Markets and the Macroeconomy ; Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy ; Market Structure, Pricing, and Design: Monopoly
• Subject: deleveraging ; monetary union ; structural reforms ; synergies ; zero lower bound

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Arce, Óscar ; Hurtado, Samuel ; Thomas, Carlos
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2016

Further information

• DOI: doi:10.2866/26487
• Handle: http://hdl.handle.net/10419/154375
• Last update: 10.03.2025, 11:46 AM CET