Fiscal and macroprudential policies in a monetary union

  1. José E. Boscá 1
  2. Javier Ferri 1
  3. Margarita Rubio 2
  1. 1 Universitat de València
    info

    Universitat de València

    Valencia, España

    ROR https://ror.org/043nxc105

  2. 2 University of Nottingham
    info

    University of Nottingham

    Nottingham, Reino Unido

    ROR https://ror.org/01ee9ar58

Revista:
Documentos de trabajo ( FEDEA )

ISSN: 1696-7496

Año de publicación: 2022

Número: 8

Páginas: 1-46

Tipo: Documento de Trabajo

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Otras publicaciones en: Documentos de trabajo ( FEDEA )

Resumen

In the European Monetary Union (EMU), monetary policy is decided by the European Central Bank (ECB). This can create some imbalances that can potentially be corrected by national policies. So far, Öscal policy was the natural candidate to adjust those imbalances. Nevertheless, after the global Önancial crisis (GFC), a new policy candidate has emerged, namely national macroprudential policies, with the mission of reducing Önancial risks. This issue gives rise to an interesting research question: how do macroprudential and Öscal policies interact? By a§ecting real interest rates and the level of activity, a discretionary macroprudential policy alters the evolution of public debt and can impose a Öscal cost when the government is forced to increase tax rates to stabilize the public debt-to-GDP ratio. In a monetary union, a domestic macroprudential shock creates substantial cross- border Önancial e§ects and also ináuences the foreign country Öscal stance. Moreover, a discretionary government spending policy a§ects housing prices, so the strenght with which macroprudential policy reacts to a change in the price of houses has an impact on the Öscal multiplier.

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