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Fiscal Policy under Alternative Fiscal Discipline Regimes in a Currency Union

In: Ekonomický časopis/Journal of Economics, vol. 66, no. 2
Irem Zeyneloglu

Details:

Year, pages: 2018, 159 - 180
Keywords:
fiscal policy, fiscal discipline, currency union JEL Classification: E62, F41, H62
Article type: Vedecký / Article
About article:
The present paper uses a two-country overlapping generations framework in order to assess the implications of the degree of fiscal discipline on the fiscal policy effectiveness in a currency union. The results show that, initially, a fiscal stimulus implemented under the condition of returning to a balanced budget leads to a higher increase in per capita output and consumption compared to a fiscal expansion with permanently higher public debt. However, in the medium run, the strict fiscal discipline case leads to an output recession despite the increase in private per capita consumption whereas a loosening of the fiscal discipline helps avoid the recession at the cost of higher public debt. The overlapping-generations framework shows also the demographic impact on the fiscal policy effectiveness under different degrees of fiscal discipline.
The present paper uses a two-country overlapping generations framework in order to assess the implications of the degree of fiscal discipline on the fiscal policy effectiveness in a currency union. The results show that, initially, a fiscal stimulus implemented under the condition of returning to a balanced budget leads to a higher increase in per capita output and consumption compared to a fiscal expansion with permanently higher public debt. However, in the medium run, the strict fiscal discipline case leads to an output recession despite the increase in private per capita consumption whereas a loosening of the fiscal discipline helps avoid the recession at the cost of higher public debt. The overlapping-generations framework shows also the demographic impact on the fiscal policy effectiveness under different degrees of fiscal discipline.
How to cite:
ISO 690:
Zeyneloglu, I. 2018. Fiscal Policy under Alternative Fiscal Discipline Regimes in a Currency Union. In Ekonomický časopis/Journal of Economics, vol. 66, no.2, pp. 159-180. 0013-3035.

APA:
Zeyneloglu, I. (2018). Fiscal Policy under Alternative Fiscal Discipline Regimes in a Currency Union. Ekonomický časopis/Journal of Economics, 66(2), 159-180. 0013-3035.