{
  "title": "Shared Problem, Shared Solution: Benefits from Fiscal-Monetary Interactions in the Euro Area",
  "publication": "IMF Working Papers, July 21, 2023",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2023/07/21/shared-problem-shared-solution-benefits-from-fiscal-monetary-interactions-in-the-euro-area-535900",
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  "summary": "This paper employs two established macroeconomic models to show that fiscal policy in the euro area can help monetary policy in reducing inflation. Specifically, a fiscal consolidation of 1 percent of GDP for two years and 0.",
  "sections": [
    {
      "heading": "Analytical approach",
      "content": "- Employs two established macroeconomic models to evaluate interactions between fiscal and monetary policy in the euro area.\n- Focuses on union-wide fiscal consolidation scenarios and their effects on policy interest rates, inflation, output, public debt, and financial fragmentation risks."
    },
    {
      "heading": "Key quantitative findings",
      "content": "- A fiscal consolidation of 1 percent of GDP for two years and 0.5 percent in the third year across the euro area:\n  - Would ease the policy interest rate by 30-50 basis points relative to the baseline scenario.\n  - Would lower inflation (magnitude described qualitatively in the source).\n  - Would put the public debt-to-GDP ratio on a downward path.\n  - Would have output costs that reverse after the second year.\n- Stronger fiscal contribution to the policy mix could mitigate financial fragmentation risks."
    },
    {
      "heading": "Implications for policy and outcomes",
      "content": "- Synchronized fiscal and monetary policies offer gains even when monetary policy is unconstrained.\n- Sharing the burden of lowering inflation through fiscal consolidation among euro area members:\n  - Is beneficial for union-wide inflation reduction.\n  - Improves debt sustainability.\n  - Induces a lower policy rate path."
    },
    {
      "heading": "Subject tags and keywords (as provided)",
      "content": "- Subject: Fiscal consolidation, Fiscal policy, Fiscal stance, Inflation, Prices, Public debt\n- Keywords: Annex I. Policy synchronization; Fiscal consolidation; fiscal policy; fiscal policy in the euro area; Fiscal stance; Global; Inflation; inflation reduction; monetary policy; monetary policy interaction; policy coordination; Policy mix; synchronized fiscal policy"
    },
    {
      "heading": "Publication metadata (selected)",
      "content": "- Pages: 27\n- Volume: 2023\n- Issue: 149\n- Series: Working Paper No. 2023/149\n- DOI: https://doi.org/10.5089/9798400249051.001\n- ISBN: 9798400249051\n- ISSN: 1018-5941\n\nSource: \"Shared Problem, Shared Solution: Benefits from Fiscal-Monetary Interactions in the Euro Area\", Robert C. M. Beyer; Rupa Duttagupta; Alexandra Fotiou; Keiko Honjo; Mark A Horton; Zoltan Jakab; Vina Nguyen; Rafael A Portillo; Jesper Lindé; Nujin Suphaphiphat; Li Zeng; IMF Working Papers, July 21, 2023.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2023/07/21/shared-problem-shared-solution-benefits-from-fiscal-monetary-interactions-in-the-euro-area-535900"
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    "Authors: Robert C. M. Beyer, Rupa Duttagupta, Alexandra Fotiou, Keiko Honjo, Mark A Horton, Zoltan Jakab, Vina Nguyen, Rafael A Portillo, Jesper Lindé, Nujin Suphaphiphat, Li Zeng",
    "Published: July 21, 2023",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798400249051.001",
    "Employs two established macroeconomic models to evaluate interactions between fiscal and monetary policy in the euro area.",
    "Focuses on union-wide fiscal consolidation scenarios and their effects on policy interest rates, inflation, output, public debt, and financial fragmentation risks.",
    "A fiscal consolidation of 1 percent of GDP for two years and 0.5 percent in the third year across the euro area:",
    "Stronger fiscal contribution to the policy mix could mitigate financial fragmentation risks.",
    "Synchronized fiscal and monetary policies offer gains even when monetary policy is unconstrained.",
    "Sharing the burden of lowering inflation through fiscal consolidation among euro area members:",
    "Subject: Fiscal consolidation, Fiscal policy, Fiscal stance, Inflation, Prices, Public debt",
    "Keywords: Annex I. Policy synchronization; Fiscal consolidation; fiscal policy; fiscal policy in the euro area; Fiscal stance; Global; Inflation; inflation reduction; monetary policy; monetary policy interaction; policy coordination; Policy mix; synchronized fiscal policy",
    "Pages: 27",
    "Volume: 2023",
    "Issue: 149",
    "Series: Working Paper No. 2023/149",
    "DOI: https://doi.org/10.5089/9798400249051.001",
    "ISBN: 9798400249051",
    "ISSN: 1018-5941",
    "**Working Paper**"
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