FISCAL POLICY UNDER ALTERNATIVE FISCAL DISCIPLINE REGIMES IN A CURRENCY UNION

• Authors: Zeyneloglu Irem
• Languages of publication: EN

Abstracts

EN

The present paper uses a two-country overlapping generation 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.

Keywords

EN

FISCAL POLICY; CURRENCY UNION

• Publisher: Institute of Slovak and World Economics and Institute for Forecasting, Slovak Academy of Sciences
• Journal: Ekonomický časopis (Journal of Economics)
• Year: 2018
• Volume: 66
• Issue: 2
• Pages: 159 – 180

Contributors

author

Zeyneloglu Irem

• Galatasaray University, Faculty of Economic and Administrative Sciences, 36 Çırağan Avenue, 34349 Istanbul, Turkey