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Interactions between fiscal multipliers and sovereign risk premium during fiscal consolidation: model based assessment for the euro area

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  • Lalik, Magdalena

Abstract

The paper presents a model-based assessment of fiscal multipliers operating in the euro area during the period 2011-2014. The assessment is conditional on two distinct reactions of the sovereign risk premium (either responding endogenously to fiscal shocks or being an exogenous process) and two types of monetary policy (accommodative and non-accommodative). Applying those multipliers to the amount of austerity measures implemented in years 2011-14, the paper evaluates their possible fallouts and shows that the output effects of the recent fiscal consolidations were largely determined by two key factors: financial markets JEL Classification: E42, E32, F42, F45

Suggested Citation

  • Lalik, Magdalena, 2017. "Interactions between fiscal multipliers and sovereign risk premium during fiscal consolidation: model based assessment for the euro area," Working Paper Series 2016, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20172016
    Note: 1420525
    as

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    References listed on IDEAS

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    Cited by:

    1. Bańkowski, Krzysztof, 2023. "Fiscal policy in the semi-structural model ECB-BASE," Working Paper Series 2802, European Central Bank.
    2. Eduardo Garzón Espinosa & Bibiana Medialdea García & Esteban Cruz Hidalgo, 2021. "Fiscal Policy Approaches: An Inquiring Look From The Modern Monetary Theory," Journal of Economic Issues, Taylor & Francis Journals, vol. 55(4), pages 999-1022, October.
    3. Stefano Neri & Stefano Siviero, 2019. "The non-standard monetary policy measures of the ECB: motivations, effectiveness and risks," Questioni di Economia e Finanza (Occasional Papers) 486, Bank of Italy, Economic Research and International Relations Area.

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    More about this item

    Keywords

    debt dynamics; euro area; Fiscal multiplier; macroeconomic models; sovereign risk premium;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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