Monetary financing of public investment: a viable way forward for the euro area?

Artikel

This article poses the question of whether monetary financing of public investment constitutes a viable way forward for the euro area. The problems of low inflation, high unemployment and public debts seem scarcely resolvable in an environment that is constrained by the virtual exhaustion of monetary policy and legal limitations on expansionary fiscal policy. The author draws on the literature on monetary finance to identify key features of a scheme that could function in the context of EMU. He proposes to achieve an indirect monetary financing of public investment by the ECB committing to take newly issued EIB bonds on to its balance sheet. This would be essentially costless in a deflationary environment and could be expected to exhibit high multiplier effects. The independence of the ECB is maintained by making bond purchases subject to an inflation 'trigger'.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: European Journal of Economics and Economic Policies: Intervention (EJEEP) ; ISSN: 2052-7772 ; Volume: 13 ; Year: 2016 ; Issue: 2 ; Pages: 241-254

Classification and Topics

• Classification: Wirtschaft ; Institutions and the Macroeconomy ; General Aggregative Models: Keynes; Keynesian; Post-Keynesian ; Investment; Capital; Intangible Capital; Capacity ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Price Level; Inflation; Deflation ; Central Banks and Their Policies ; Fiscal Policy ; Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy ; National Government Expenditures and Related Policies: Infrastructures; Other Public Investment and Capital Stock ; National Debt; Debt Management; Sovereign Debt
• Subject: monetary finance ; monetary policy ; public investment ; euro area ; ECB ; EIB

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Watt, Andrew
• Event: Veröffentlichung
• (who): Edward Elgar Publishing
• (where): Cheltenham
• (when): 2016

Further information

• DOI: doi:10.4337/ejeep.2016.02.08
• Handle: http://hdl.handle.net/10419/277363
• Last update: 10.03.2025, 11:42 AM CET