Author information:
Kristóf Lehmann: Magyar Nemzeti Bank, Director. E-mail: lehmannk@mnb.hu
Olivér Nagy: Magyar Nemzeti Bank, Analyst. E-mail: nagyoli@mnb.hu
Zoltán Szalai: Magyar Nemzeti Bank, Senior Economic Expert. E-mail: szalaiz@mnb.hu
Balázs H. Váradi: Magyar Nemzeti Bank, Head of Department. E-mail: varadib@mnb.hu
Abstract:
In our study we present the coordination between the two main pillars of economic policy – monetary policy and fiscal policy – across the euro area. Growth in the euro area has noticeably decelerated in the past three decades, meaning the economy of the euro area has departed significantly from the logic of the Maastricht criteria. In addition, the lack of a common budget at euro area level and the fact that the oft-conflicting rules overlook sectoral interrelationships also point to the existence of a systemic problem. The difficulties have become increasingly evident in recent years as even the ultra-loose monetary policy has failed to stimulate economic growth significantly. This adverse process was intensified further by fiscal policy, which was intended to be consistent with the fiscal rules formulated in line with Maastricht criteria and can be considered tight, overall, at the euro area level. In recent months, even the policymakers of the European Central Bank have embarked on an open debate with regard to the role of policy branches. In the current political and legal framework, the ECB may be left with limited leeway for easing monetary conditions. In light of all these factors, there may be a need for a more active fiscal policy to stimulate the euro area economy, which, however, may sharpen the debate between the policymakers of individual Member States.
Cite as (APA):
Lehmann, K., Nagy, O., Szalai, Z., & Váradi, B. H. (2020). Coordination(?) between the Branches of Economic Policy across the Euro Area. Financial and Economic Review, 19(1), 37–64. https://doi.org/10.33893/FER.19.1.3764
Column:
Study
Journal of Economic Literature (JEL) codes:
E52, E62, E63, F45
Keywords:
monetary policy, fiscal policy, economic policy coordination, Maastricht criteria
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