Index
Rosaria Rita Canale
(Parthenope University of Naples, Italy)
Rajmund Mirdala
(Technical University of Košice, Slovakia)
Fiscal and Monetary Policy in the Eurozone: Theoretical Concepts and Empirical Evidence
ISBN: 978-1-78754-126-9, eISBN: 978-1-78743-793-7
Publication date: 13 May 2019
This content is currently only available as a PDF
Citation
Canale, R.R. and Mirdala, R. (2019), "Index", Fiscal and Monetary Policy in the Eurozone: Theoretical Concepts and Empirical Evidence, Emerald Publishing Limited, Leeds, pp. 195-202. https://doi.org/10.1108/978-1-78743-793-720191004
Publisher
:Emerald Publishing Limited
Copyright © 2019 Emerald Publishing Limited
INDEX
Index
Note: Page numbers followed by “n” with numbers indicate footnotes.
Ad hoc money demand
, 150
Aggregate demand
, 15, 31
Asset Purchase Program (APP)
, 135
Asset-Backed Securities Purchase Program (ABSPP)
, 135–136
Asymmetric shocks
, 9–12
Automatic balancing mechanisms
, 9–12
AWM models
, 50
Balance of payments
, 15
account equation
, 166
approach
, 73
equilibrium
, 60
motive
, 78
Balassa-Samuelson effect
, 25n5, 87, 89
Bank reserves
, 92, 118, 133
Barro theorem
, 42
Beggar-thy-neighbor policies
, 171–172
Bretton Woods
agreements
, 2, 6–7, 22
policy principles from World War II to Fall
, 12–22
Budget-balance-neutral fiscal policy
, 36–37
Capital mobility
, 7, 96
degree
, 14, 80
free
, 21, 169
Capital movements
, 118, 153
Central banks
, 26, 99, 105, 130
purchases
, 124
reaction function
, 35
in transition economies
, 118
Centralized monetary policy
, 158–159
Commission of the European Economic Cooperation (CEEC)
, 6
Compensation motive
, 78
Compensatory effect
, 78
Consensus mechanism
, 155
Consumption function
, 32–33, 40, 45–46, 50
Contemporary theory, Keynesian macroeconomics to
, 31–32
“Convergence criteria” of Maastricht Treaty
, 8
Corporate Sector Purchase Program (CSPP)
, 135
Crawling peg regime
, 102, 111–112
Credit transmission channel
, 115
Cross rates
, 6
Crowding-in effect
, 60
Crowding-out effects
, 34, 45–46, 48
in monetary union
, 59–62, 158
Cumulative structural public balance adjustment (CUM_SA)
, 173
Currency appreciation
, 85
Current account (CA)
, 166
Current debt/GDP ratio
, 55
Current inflation
, 35–36
Debt dynamics
, 62
Debt-to-GDP ratio
, 37, 55
Decentralized fiscal policy
, 158–159
Decision-making process
, 172
Deficit financing
, 82–83
Deflation
, 143
deficit financing
, 82–83
in Eurozone
, 83–84
purchase of real assets or foreign currency
, 83
selected approaches to
, 82
Deflationary environment
, 81
Degree of capital mobility
, 14
Delors Report
, 8
Demand function
, 160
aggregate
, 109
money
, 105, 119, 131, 139
Depreciation of domestic currency
, 85
“Dissuasive arm” instrument
, 37
Domestic nominal shocks
, 97
Domestic policy structure
, 154
Domestic price pressures
, 75
Dynamic aggregate supply
, 35–36
Dynamic IS equation (DIS equation)
, 149
Dynamic Stochastic General Equilibrium models (DSGE models)
, 44–45, 146
monetary policy in
, 146–151
Economic/economy
, 109–110
crisis
, 72, 91, 132–133, 137, 171
economic growth, relationship between inflation and
, 71–72
objectives
, 172
policies
, 29, 154–155, 171–172
theory
, 42, 99, 170
Economists
, 31
Effective market classification
, 15–16
Empirical literature
, 49–54
Employment
of inflation targeting
, 107
motive
, 76–77
Equilibrium income
, 31, 161
European Central Bank (ECB)
, 8, 48, 72, 165
formulation
, 126–127
global financial crisis and Great Recession
, 132–134
instruments employing by broad policy of liquidity provision
, 135–136
monetary policy beginning and adjustment
, 128–131
monetary policy evolution
, 126
monetary policy until financial crisis
, 131–132
single monetary policy
, 127–128
ultra-low inflation and QE
, 134–135
European Coal and Steel Community
, 6
European Community of Atomic Energy
, 6
European Council
, 8
European Council of Economic and Finance ministers (ECOFIN)
, 7
European currencies
, 6–7
European Economic Community (EEC)
, 6
European Financial Stability Facility (EFSF)
, 165n1
European Financial Stabilization Mechanism (EFSM)
, 165n1
European Monetary Institute (EMI)
, 127
European Monetary System (EMS)
, 8–9
European Monetary Union (EMU)
, 5, 52, 170
historical roots and events
, 5–12
European Recovery Program
, 6
European Stability Mechanism (ESM)
, 58, 165
European System of Central Banks
, 8
European transition economies
, 100
exchange rate regimes evolution in
, 101–104
Eurozone
, 158
deflation in
, 83–84
evolution of theoretical debate and case
, 44–49
financial market behavior
, 161
fiscal policy in
, 2
future
, 170–176
graphical representation
, 161–162
inflation drivers in
, 74–75
monetary policy in
, 2–3
national government behavior
, 159–161
policy coordination in
, 3
policy framework in
, 2
rules in
, 37–38
stylized model for country belonging to
, 158
sustainable shocks
, 162
unsustainable shocks
, 162–165
“Eurozone trilemma”
, 169, 175
triangle
, 170
Excessive deficit procedure (EDP)
, 37
Exchange rate
, 27, 45, 53, 61, 75, 89
consequences of exchange rate fluctuations
, 85–86
equation
, 111
and inflation relationship
, 84–85
monetary policy and exchange rate system
, 112–114
shock
, 73–75
targeting
, 94–104
transmission channel
, 116
Expansionary discretionary policy
, 62
Expansionary fiscal policies, inflation and output effects of
, 35–36
Expansive monetary policy
, 58
Expected devaluation
, 59
External equilibrium
, 165
policy coordination and
, 165–170
External imbalances
, 154
Federal Reserve
, 6–7
Federal-type political organization
, 7
Federalism
, 6
Financial crisis
, 38, 46, 59, 167
monetary policy until
, 131–132
Financial indicators
, 127
Financial markets
, 46, 58, 158–159
behavior
, 161
demand higher interest rate
, 163
Financial sector motive
, 78
Financing method
, 34
First Covered Bond Purchase Program (CBPP1)
, 136
Fiscal and Monetary Policy in the Eurozone
, 1–2
Fiscal approach
, 72
Fiscal Compact
, 38, 57–58, 165
Fiscal discipline
, 46
Fiscal dummy variable approach
, 51
Fiscal policy
, 15, 32, 137, 153–154, 156–157
budgetary discipline and left to management of individual states
, 28–29
demand
, 163
effectiveness
, 18–19, 21–22
empirical literature
, 49–54
in Eurozone
, 2, 37–38
evolution of theoretical debate and case of Eurozone
, 44–49
fiscal policy theory in Keynesian world
, 32–40
and intertemporal approach
, 40–44
issue of public debt
, 54–64
from Keynesian macroeconomics to contemporary theory
, 31–32
managed within general criterion of spending constraint
, 28
separation between monetary and
, 27–28
Fisher equation
, 25
Fixed exchange rates
, 94–95, 97–99, 155, 165, 171
regimes
, 20–22, 154, 166
Fixed nominal exchange rate
, 90
Flexible exchange rate
dilemma
, 98–99
regimes
, 17–19, 52
Foreign exchange operations
, 124–125
Foreign nominal shocks
, 97
Funds
, 159
GDP
, 9, 28, 30, 32–33, 37–38, 51, 62, 71
General Theory (1936)
, 31, 82
Generalized Taylor rule
, 144–145
Global financial crisis
, 132–134
Globalization process
, 3
Gold Exchange Standard
, 6
Governing Council of ECB
, 129
Government budget constrain implementation
, 150
Government markets
, 159
Graphical representation
, 161–162
Great Depression
, 139
“Great Moderation” period
, 147
Great Recession
, 132–134, 137
Growth plus inflation rate
, 54
“Haavelmo Theorem”
, 38
Harmonized Index of Consumer Prices (HICP)
, 128–129
Higher nominal interest rates
, 139
Impulse–response functions
, 51
Income effects
, 155
Income motive
, 77
Individual intertemporal preferences
, 41
Individual monetary aggregates
, 141
Inflation
, 27, 45–46, 93, 154
benefits associated with reducing rate of inflation
, 79
drivers in Eurozone
, 74–75
effects of reducing
, 79–82
exchange rate and inflation relationship
, 84–85
exchange rate shock
, 73–74
of expansionary fiscal policies
, 35–36
Fiscal approach
, 72–73
growth
, 128
monetary shock
, 74
impact of nominal wage rigidity
, 80
inflation-forecast targeting
, 107
premium
, 81
reducing inflation effects on real costs
, 80–81
relationship between economic growth and
, 71–72
sources
, 72
specific approaches to
, 76–78
Summers Effect
, 80
targeting
, 107–109, 125–126, 130
value
, 160
wage shock
, 73
Inflationary development
, 142
Inflationary effects
, 35
Inflationary monetary policy
, 66
Instrumental variables of economic policy
, 14
Integration process
, 3, 6
Interest as operational criteria
, 118–120
Interest rates
, 45, 48, 138, 154–155, 161, 169, 175
policy
, 132
International Monetary Fund (IMF)
, 105
International policy structure
, 154
International spillover effects
, 155–157
Intertemporal approach
, 40–44
Intertemporal choices approach
, 40
Intertemporal public budget constraint
, 42
Intra-Eurozone current account imbalances
, 91
Irrevocably fixed exchange rate regime
, 169
IS-LM model
, 115
Keynes approach
, 67
Keynesian economic theory
, 31
Keynesian effects of non-Keynesian fiscal policies
, 49
Keynesian macroeconometric models
, 148
Keynesian macroeconomics
to contemporary theory
, 31–32
model
, 13
Keynesian multiplier
, 40, 157
Keynesian revolution
, 22
Keynesian theory
, 2, 153–154
of economic policy
, 12
Keynesian vision
, 32
Keynesian world, fiscal policy theory in
, 32
effect on income of public expenditure
, 40
fiscal policy rules in Eurozone
, 37–38
inflation and output effects of expansionary fiscal policies
, 35–36
money-financed public expenditure
, 34
public sector budget constraint
, 33, 39
Labor mobility
, 96
Lagrangian function
, 41, 43
Liberalization process
, 3
Life-cycle consumption theory
, 40
Liquidity
constraints
, 45–46
trap
, 82
Long-run equilibrium income
, 46
Long-run multipliers
, 50
Long-run rate of growth
, 53–54
Long-term interest rates on government bonds
, 167–168
Long-term monetary neutrality
, 92
Low inflation economies
, 84
Low-growth regimes
, 51
Lucas critique
, 42
Maastricht Treaty
, 9, 28, 57, 158
convergence criteria of
, 8
Macroeconomic aspects
central bank
, 91–92
choice between inflation and price targeting
, 125–126
monetary policy conduction and
, 91
nominal anchor in monetary policy conduction
, 94–114
operational criterion in transmission mechanism of monetary policy
, 117–125
price stability
, 92–94
transmission mechanism of monetary policy
, 114–117
Macroeconomic consensus
, 1
Macroeconomic equilibrium
, 36
Macroeconomic model evolution
, 148
Macroeconomic stability
, 97, 100
Market-type operations
, 124
Marshall Plan
, 6
Material deprivation (MD)
, 173
McCallum rule
, 143
Medium-term objective (MTO)
, 37
Monetary conditions
, 53
Monetary instruments
, 122–123
Monetary market
, 46
Monetary policy
, 15, 54, 65, 117, 153–154, 156, 166
conduction and macroeconomic aspects
, 91–126
consequences of exchange rate fluctuations
, 85–86
controversies
, 137
in DSGE model
, 146–151
ECB’s monetary policy evolution
, 126–136
effectiveness
, 18, 20
effects of reducing inflation
, 79–82
in Eurozone
, 2–3
exchange rate and inflation relationship
, 84–85
inflation sources
, 72–78
interest rates
, 63
Phillips curve NAIRU
, 65–71
with purpose of maintaining price growth constant
, 28
qualitative and quantitative approach
, 137–140
real exchange rate
, 86–91
relationship between inflation and economic growth
, 71–72
rules vs. discretion
, 140–143
selected approaches to deflation
, 82–84
separation between fiscal and
, 27–28
shocks
, 151
single
, 28
strategy
, 45–46
Taylor rule
, 143–146
Monetary shock
, 74
Monetary strategy
, 127
Monetary targeting
, 105–106
Monetary transmission channel
, 116
Monetary Union, crowding-out effect in
, 59–62
Monetary Union case
, 46
Money demand function
, 105–106, 131, 139
Money growth
, 34
Money transmission channel
, 115
Money-financed public expenditure
, 34
MULTIMOD models
, 50
Mundell–Fleming model
, 17–22, 48, 57–58, 155, 167
Mundell–Fleming trilemma
, (see Mundell–Fleming model)
Narrow interpretation of Taylor rule
, 144–145
National currencies
, 6
National government behavior
, 159–161
National gross domestic product
, 31, 158
Natural rate of interest
, 149–150
Neoclassical synthesis
, 13
Net domestic assets (NDAs)
, 118–119
Net international reserves (NIR)
, 118
New Classical Economics
, 24
New classical macroeconomic models
, 148
New consensus macroeconomics, policy model of
, 22–27
New Keynesian DSGE models
, 148–149
New Keynesian economics
, 23–24
New Keynesian Phillips curve (NKPC)
, 149
New Neoclassical synthesis (NNS)
, 2, 24, 44–45
New-neoclassical synthesis
, 45–46
NIGEM model
, 50
Nominal anchor in monetary policy conduction
, 94
crawling peg regime
, 111–112
exchange rate targeting
, 94–104
inflation targeting
, 107–109
monetary policy and exchange rate system
, 112–114
monetary targeting
, 105–106
nominal income targeting
, 109–111
Nominal income targeting
, 109–111
Nominal interest rate
, 159
Nominal prices
, 67, 81
Nominal rate of GDP growth
, 54
Nominal wage rigidity impacts
, 80
Non-accelerating inflation rate of unemployment (NAIRU)
, 70, 145
Phillips curve
, 65–71
Non-Keynesian effects of Keynesian fiscal policy
, 44
Non-tradable good prices
, 87
Official interest rate
, 26
Open market operations
, 124
Operational criterion in transmission mechanism of monetary policy
, 117–125
Optimal currency area theory (OCA theory)
, 9–12
Output effects of expansionary fiscal policies
, 35–36
Past inflation
, 78
Payments
, 39–40
Phillips curve
, 25, 27
NAIRU
, 65–71
Policy “trilemma”
, 169
Policy advice
, 37
Policy coordination in Eurozone
, 3
consensus mechanism
, 155
and external equilibrium
, 165–170
fiscal policy
, 154
and future
, 170–176
general framework
, 153
international spillover effects under floating exchange rate regimes
, 155–157
national gross domestic products
, 158
stylized model for country belonging to Eurozone
, 158–165
Policy framework in Eurozone
, 2, 27–30, 46
EMU
, 5–12
policy model of new consensus macroeconomics
, 22–27
policy principles from World War II to Fall of Bretton Woods
, 12–22
Political credibility
, 97
Preventive arm instrument
, 37
Price effects
, 34
Price stability
, 92–94, 130, 158
Price targeting
, 125–126
Price variables
, 121
Primary deficit/GDP ratio
, 55
Production function
, 150
Public debt
, 154
repayments
, 80–81
Public debt issue
, 54–64
Public expenditure
, 33, 53–54, 60
Public sector budget constraint
, 33, 39
Public Sector Purchase Programme (PSPP)
, 135
Purchasing power parity (PPP)
, 80, 86, 88
Qualitative approach
impact to monetary policy conduction
, 123–125
to monetary policy conduction
, 137–140
Quantitative approach
impact to monetary policy conduction
, 123–125
to monetary policy conduction
, 137–140
Quantitative easing (QE)
, 72, 134–135
Quantitative variables as operational criteria
, 118–120
Quantity theory of money
, 34
Rational economic agents
, 68
Rational expectations
, 42
Real balance effect
, 159
Real business cycle theory (RBC theory)
, 23, 44, 148
Real costs, reducing inflation effects on
, 80–81
Real exchange rate
, 25, 86, 157
growth
, 160
prices of tradable and non-tradable goods
, 87–89
twin deficits (imbalances) in Eurozone
, 89–91
Real GDP growth rate
, 55
Real interest rate
, 25, 55, 139
Real market
, 46
Real shocks
, 97
Real value of money
, 81
Real-output-plus-inflation
, 144
“Relative effectiveness” principle
, 15–16
Ricardian equivalence
, 53
Ricardian Equivalence Theorem
, 42
Rules vs. discretion
, 140–143
Second Covered Bond Purchase Program (CBPP2)
, 136
Second generation DSGE models
, 147
Securities Markets Program (SMP)
, 133, 136
“Severe economic downturns”
, 38
Short-run market disequilibria
, 23
Short-term interest rates
, 118
Short-term multipliers
, 50
Short-term policies
, 27
Single monetary policy
, 127–128, 165, 171
Sole monetary dimension
, 31
Sound fiscal dynamics
, 162
Sound public finance
, 172
Stability and Growth Pact (SGP)
, 8, 37, 57
Stabilization policies
, 12
Stable market interest rates
, 118
Stagflation
, 22
Structural public balance
, 172
adjustments
, 54
change in structural balance and change in debt
, 63–64
crowding-out effect in monetary union
, 59–62
debt dynamics in case
, 56
ESM
, 58
GDP growth rates
, 62
growth of debt/GDP ratio
, 55
ten-year government bond yields
, 57
Stylized model for country belonging to Eurozone
, 158–165
Summers Effect
, 80
Super-Barro effect
, 44, 48–49, 52
Supply curve slope
, 35–36
Sustainable public finance
, 46
Sustainable shocks
, 162
Svensson model
, 107
Taylor rule
, 2, 24, 26, 29, 35, 143–146, 150
broad interpretation of
, 145–146
styled equation
, 96
Technology shock
, 150–151
Terms of trade (TOT)
, 71
Theoretical debate evolution
, 44–49
Third Covered Bond Purchase Program (CBPP3)
, 136
Time horizon
, 130–131
Time series regressions
, 50–51
Tradable good prices
, 87
Trade balance
, 153
Transition process
, 3
Transmission mechanism
of centralized monetary policy
, 158
interest and quantitative variables as operational criteria
, 118–120
of monetary policy
, 92, 114–117, 120–121
operational criteria and monetary instruments
, 122–123
operational criterion in
, 117–118
impact of quantitative and qualitative approach
, 123–125
Treaty of Rome
, 6
Treaty of Versailles
, 6n1
Twin deficits (imbalances) in Eurozone
, 89–91
Ultra-low inflation
, 134–135
Uncovered interest parity (UIP)
, 59
Unholy Trinity
, (see Mundell–Fleming model)
Union of European Federalists
, 6
“Unpleasant monetarist arithmetic”
, 154
Unsound fiscal dynamics
, 162, 164
Unsustainable shocks
, 162–165
Wage indexation
, 73, 76–77
Wage shock
, 73
Werner Report
, 7–8
Zero-lower bound
, 63