BIROn - Birkbeck Institutional Research Online

Made in Europe: monetary–fiscal policy mix with financial frictions

Gomes, Pedro and Seoane, H.D. (2024) Made in Europe: monetary–fiscal policy mix with financial frictions. European Economic Review 165 , ISSN 0014-2921.

[img] Text
53417.pdf - Author's Accepted Manuscript
Restricted to Repository staff only

Download (1MB)
[img]
Preview
Text
53417a.pdf - Published Version of Record
Available under License Creative Commons Attribution.

Download (890kB) | Preview

Abstract

We study the role of fiscal and monetary policies in a financially constrained economy. An active monetary–passive fiscal regime amplifies technology shocks, mitigates preference shocks, and neutralizes the expansionary effects of fiscal shocks through “debt deflation” and “real interest rate” channels, compared to an active fiscal–passive monetary policy regime. Several features of the data suggest that in the aftermath of the 2007 Financial crisis, the monetary policy in the United States was more dovish than in the Euro Area while fiscal policy seemed less concerned about the dynamics of sovereign debt, implying that the distinct post-crisis dynamics of the United States and the Euro area can be rationalized through different fiscal and monetary policy mixes.

Metadata

Item Type: Article
Keyword(s) / Subject(s): fiscal policy, monetary policy, monetary-fiscal policy interactions, financial frictions
School: Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
Depositing User: Administrator
Date Deposited: 15 May 2024 13:27
Last Modified: 16 May 2024 14:07
URI: https://eprints.bbk.ac.uk/id/eprint/53417

Statistics

6 month trend
22Downloads
6 month trend
255Hits

Additional statistics are available via IRStats2.

Archive Staff Only (login required)

Edit/View Item
Edit/View Item