Year: 2024
Type: article
Abstract: In the European Monetary Union (EMU), monetary policy is determined by the European Central Bank (ECB). This arrangement can give rise to certain national economic imbalances that may potentially be addressed through national policies. Traditionally, fiscal policy has been the primary tool to correct these imbalances. However, following the global financial crisis (GFC), a new policy tool has emerged: national macroprudential policies, which aim to mitigate financial risks. This situation raises an intriguing research question: How do macroprudential and fiscal policies interact? Through their influence on real interest rates and economic activity, discretionary macroprudential policies can impact the trajectory of public debt and may necessitate fiscal adjustments, such as tax rate increases, to stabilize the public debt-to-GDP ratio. In a monetary union, a domestic macroprudential shock generates significant cross-border financial effects and also influences the fiscal stance of foreign countries. Furthermore, discretionary government spending policies have an impact on housing prices and households debt. Therefore, the responsiveness of macroprudential policy to changes in housing prices affects the fiscal multiplier.
Authors: José E. Boscá, Javier Ferri, Margarita Rubio
Institutions: Universitat de València, University of Nottingham
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $3,090
Funders: Fundación BBVA, Eberhard Karls Universität Tübingen, Generalitat Valenciana, Banca d'Italia, Ministerio de Ciencia e Innovación, Banco Bilbao Vizcaya Argentaria, Fundación Rafael del Pino, Directorate-General for Research and Innovation, Agencia Estatal de Investigación, Conselleria de Cultura, Educación y Ciencia, Generalitat Valenciana, Conselleria de Innovación, Universidades, Ciencia y Sociedad Digital, Generalitat Valenciana, FP7 Science in Society
OpenAlex ID: W4404738130