Euro Area Policies: Spillover Report for the 2011 Article IV Consultation and Selected Issues
IMF Staff Country Reports, July 19, 2011
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- Euro Area Policies: Spillover Report for the 2011 Article IV Consultation and Selected Issues
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Bibliographic details
- Published: July 19, 2011
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781462339549.002
Summary and key findings
- The euro area (EA) plays a major role in the global economy.
- Market perceptions of events in the EA program countries illustrate the possibility of large spillovers from the area in times of stress.
- The prospect of large spillovers underscores the urgent need for actions to contain, and eventually overcome, the ongoing crisis.
- The planned fiscal consolidation in the EA could benefit the rest of the world.
- Spillovers from gradual monetary policy normalization appear manageable.
- Execution of the structural reform agenda will carry positive spillovers.
Analysis of spillovers and channels
- Market perceptions in EA program countries serve as indicators of potential large cross-border spillovers during periods of stress.
- Fiscal policy: planned fiscal consolidation in the EA is identified as having potential positive externalities for global demand and stability.
- Monetary policy: gradual monetary policy normalization is assessed as likely to produce manageable spillovers.
- Structural reforms: implementation of structural reforms in the EA is expected to generate positive spillovers through improved growth and resilience.
Policy recommendations and implications
- Contain and eventually overcome the ongoing crisis through decisive actions, given the risk of large spillovers from EA program countries.
- Proceed with planned fiscal consolidation in a manner that can benefit the rest of the world.
- Pursue gradual monetary policy normalization to limit disruptive spillovers.
- Accelerate and execute the structural reform agenda to secure positive cross-border effects.
Source: Euro Area Policies: Spillover Report for the 2011 Article IV Consultation and Selected Issues, IMF Staff Country Reports, July 19, 2011.
Content in this bundle
- Box 1. Euro Area Spillovers to LICs