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The eurozone financial crisis: debt, credit ratings and monetary and fiscal policy

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  • Michael Wickens

    (University of York)

Abstract

This paper discusses the eurozone financial crisis. It argues that it was largely the result of a common monetary policy not being suitable for individual countries which led to excessive private and public borrowing and a debt crisis. Neither borrowing rates nor credit ratings anticipated the crisis. Fundamental changes to eurozone governance are being proposed. The paper examines whether instead there might be a market solution if financial markets priced risk better. Accordingly, a more timely way of obtaining credit ratings is shown.

Suggested Citation

  • Michael Wickens, 2016. "The eurozone financial crisis: debt, credit ratings and monetary and fiscal policy," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 43(2), pages 219-233, May.
    • Handle: RePEc:kap:empiri:v:43:y:2016:i:2:d:10.1007_s10663-016-9335-5
    DOI: 10.1007/s10663-016-9335-5
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    References listed on IDEAS

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    1. Cúrdia, Vasco & Woodford, Michael, 2016. "Credit Frictions and Optimal Monetary Policy," Journal of Monetary Economics, Elsevier, vol. 84(C), pages 30-65.
    2. Davig, Troy & Leeper, Eric M. & Walker, Todd B., 2011. "Inflation and the fiscal limit," European Economic Review, Elsevier, vol. 55(1), pages 31-47, January.
    3. Davig, Troy & Leeper, Eric M. & Walker, Todd B., 2010. ""Unfunded liabilities" and uncertain fiscal financing," Journal of Monetary Economics, Elsevier, vol. 57(5), pages 600-619, July.
    4. Gertler, Mark & Kiyotaki, Nobuhiro, 2010. "Financial Intermediation and Credit Policy in Business Cycle Analysis," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 11, pages 547-599, Elsevier.
    5. Vito Polito & Michael Wickens, 2011. "Assessing the fiscal stance in the European Union and the United States, 1970–2011 [‘A historical public debt database’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 26(68), pages 599-647.
    6. Polito, Vito & Wickens, Mike, 2012. "A model-based indicator of the fiscal stance," European Economic Review, Elsevier, vol. 56(3), pages 526-551.
    7. Polito, Vito & Wickens, Michael, 2015. "Sovereign credit ratings in the European Union: A model-based fiscal analysis," European Economic Review, Elsevier, vol. 78(C), pages 220-247.
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    Cited by:

    1. Alessio Terzi, 2019. "The Euro Crisis and Economic Growth: A Novel Counterfactual Approach," CESifo Working Paper Series 7746, CESifo.
    2. Terzi, Alessio, 2020. "Macroeconomic adjustment in the euro area," European Economic Review, Elsevier, vol. 128(C).
    3. Kyriazopoulos Georgios, 2019. "Credit risk evaluation and rating for SMES using statistical approaches: the case of European SMES manufacturing sector," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 9(5), pages 1-4.
    4. Yuwen Dai, 2022. "Monetary Policy and Financial Sustainability in a Two-State Open Economy," Sustainability, MDPI, vol. 14(8), pages 1-12, April.
    5. Olgica Glavaški & Emilija Beker Pucar, 2021. "Heterogeneity of fiscal adjustments in EU economies in the pre- and post-crisis periods: common correlated effects approach," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 11(1), pages 191-226, March.

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    More about this item

    Keywords

    Monetary policy; Fiscal policy; Eurozone financial crisis; Credit ratings;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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