Panoeconomicus 2017 Volume 64, Issue 1, Pages: 61-76
https://doi.org/10.2298/PAN140730021D
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Fiscal performance in monetary unions: How much austerity should be allowed?
Díaz-Roldán Carmen (University of Castilla-La Mancha, Department of Economics, Spain)
The effectiveness of fiscal policy becomes particularly relevant in the case
of the member countries of a monetary union facing a sovereign debt crisis.
In that environment, fiscal policy is constrained by the need to carry out
fiscal consolidation and reduce debt levels. For that reason and with the
purpose of anchoring fiscal discipline, the adoption of fiscal rules has
become a central issue. In this paper we will analyse the management of
fiscal policies in monetary unions, when the central bank and the fiscal
authorities follow policy rules. The results are related to the
conservativeness of the central bank, the degree of austerity of the fiscal
authorities and the initial level of public debt.
Keywords: policy rules, fiscal policy, monetary unions