By Dr. Bas van Aarle, Dr. Klaus Weyerstrass (auth.)
This booklet analyses monetary interdependence within the Euro zone and offers estimates of the signal and dimension of monetary spillovers and the influence of monetary coverage coordination touching on structural and budgetary rules on financial functionality within the Euro zone. within the diversified chapters of the booklet, the subsequent issues are studied: (i) the hyperlink among monetary and financial regulations within the Euro region; (ii) the hyperlink among public debt and long term rates of interest within the Euro sector; (iii) the hyperlink among budgetary stabilisation and the extent of public debt within the Euro region; (iv) the spillovers from structural reforms within the Euro quarter, (v) the scope for the coordination of financial rules and of structural reforms within the Euro quarter, and (vi) salary flexibility within the Euro Area.
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Extra resources for Economic Spillovers, Structural Reforms and Policy Coordination in the Euro Area
4 percent. e. e. an increase in the short-term interest rate). An improvement of the fiscal balance increases output, suggesting the prevalence of positive non-Keynesian style effects from fiscal consolidation. The observed absence of effects on the trade balance suggests that the “twin deficits” hypothesis does not hold for the Euro Area: changes in the fiscal balance tend not to affect the external balance in the same direction. Furthermore, the fiscal balance shock induces a depreciation of the euro Budgetary spillovers and short-term interest rates 35 and a small increase in inflation.
Economic spillovers, structural reforms and policy coordination 21 In addition to implementing either only structural reforms or budget consolidation policies separately, combinations of both policies may be pursued. In the short run, such policy combinations result in almost additive combinations of the effects of the single policies combined. For instance, with respect to GDP and employment, the negative short-run effect of budgetary consolidation combines with the positive effect of structural reforms to give ambiguous results in the first periods, whereas for public deficit and debt, inflation and interest rates, the favourable effects of both policies reinforce each others.
3 shows for each country in the Euro Area the IRFs of 1% shocks to (i) output in the rest of the Euro Area (YGAPREA, column 1), (ii) the fiscal balance in the rest of the Euro Area (NLGYREA, column 2), (iii) the Euro Area short-term interest rate (SIN_EA, column 3), (iv) inflation in the rest of the Euro Area (INFREA, column 4). We are interested in the effects of these shocks on country j’s output (YGAP, row 1), fiscal balance (NLGY, row 2), current account (CUAY, row 3) and inflation (INF, row 4).