Fiscal Rules, Financial Stability and Optimal Currency Areas

Arbeitspapier

In this paper we suggest that Eurozone countries face a policy trade-off among: 1) a common rule imposing co-movements in fiscal policy; 2) financial stability; and 3) financial integration. We provide empirical evidence documenting the existence of such a trade-off in the period characterized by the financial crisis and by the sovereign debt crisis. Then, we conclude that the intense fiscal rules that have been introduced in the Eurozone after the emergence of the debt crisis reduced the capacity of national governments to deal with asymmetric shocks and became incompatible with either free capital mobility and/or financial stability.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 5390

Classification and Topics

• Classification: Wirtschaft ; Financial Markets and the Macroeconomy ; Policy Objectives; Policy Designs and Consistency; Policy Coordination ; Fiscal Policy
• Subject: fiscal policy rules ; Eurozone ; financial stability ; policy objectives ; optimal currency areas.

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): De Grauwe, Paul ; Foresti, Pasquale
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/110890
• Last update: 10.03.2025, 11:46 AM CET