Kingdom of the Netherlands-Netherlands: Selected Issues-Cyclically Advanced Euro-Area Economies: Consequences and Policy Options
IMF Staff Country Reports, July 5, 2001
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- Kingdom of the Netherlands-Netherlands: Selected Issues-Cyclically Advanced Euro-Area Economies: Consequences and Policy Options
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Bibliographic details
- Published: July 5, 2001
- Series: IMF Staff Country Reports
Summary findings
- Although the advent of the single currency has generated many advantages for the smaller economies of the euro area, it has raised the possibility that both the amplitude and the duration of cycles in these countries will prove greater than in the past.
- In the absence of country-specific monetary instruments, discretionary fiscal policy is the only macroeconomic instrument available for influencing aggregate demand in the short term.
- A business cycle boom may provide a desirable medium-term fiscal position with little risk to growth.
Policy implications and options
- Discretionary fiscal policy is emphasized as the primary short-term tool for influencing aggregate demand when country-specific monetary instruments are unavailable.
- Managing fiscal positions during booms is important because a business cycle boom can produce a desirable medium-term fiscal position without materially increasing growth risk.
Thematic coverage and keywords
- Subjects: Asset prices, Fiscal policy, Housing prices, Inflation, Labor, Labor markets, Prices
- Keywords: aggregate demand; asset price; Asset prices; business cycle; CR; current account; euro area; Europe; Global; house price; Housing prices; Inflation; inflation differential; ISCR; Labor markets; price boom; price inflation; unemployment rate