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Challenges to the Monetary and Fiscal Policy in the Eurozone and Bulgaria

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  • Tsvetelina Marinova

Abstract

This paper reveals key challenges to monetary and fiscal policy in the Eurozone and Bulgaria. For the Eurozone they are primarily linked to: the active, stimulating fiscal and monetary policy before and during the crisis; the high levels of budget deficits and increasing sovereign debt in the context of fragile economic growth, high unemployment, deflation. In Bulgaria, in the framework of Currency Board the political risk and the risk of devaluation pose challenges to the monetary and fiscal policy. It is likely that upon joining the Eurozone governments are tempted to increase budget deficit and public debt because the commitment to full coverage of monetary base with foreign reserves will not exist anymore as well as they may use the opportunity to raise the deficit to 3% of GDP (or even more).

Suggested Citation

  • Tsvetelina Marinova, 2015. "Challenges to the Monetary and Fiscal Policy in the Eurozone and Bulgaria," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 16-36.
    • Handle: RePEc:bas:econst:y:2015:i:1:p:16-36
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • G01 - Financial Economics - - General - - - Financial Crises

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