Abstract
In Chapter 1, it was discussed in detail that there are various spillovers in a highly integrated economic space like the Euro Area. It was explained in which ways these spillovers manifest themselves in the Euro Area e.g. through trade flows, pass-through of inflation, adjustments caused by changes of the common short-term interest rate and the exchange rate of the euro. It was also noted that there exist several spillover effects from monetary and fiscal policies in a highly integrated monetary union like the Euro Area. Monetary and fiscal policies in the Euro Area are intrinsically linked through these spillovers. In the short run, spillovers arise from the effects that monetary policy may have on the macroeconomic conditions under which fiscal policies are undertaken, and vice versa. In the long run, these spillovers/interdependencies arise in particular from the accumulation of government debt.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Bayoumi, T. and B. Eichengreen (1992), Shocking aspects of European monetary integration. In F. Torres and F. Giavazzi (eds.), Adjustment and growth in the European Monetary Union. Cambridge University Press, 1993, p.193–229.
Bernanke, B. and A. Blinder (1992), The federal funds rate and the channels of monetary transmission, American Economic Review, vol.82(4), p.901–921.
Blanchard, O. (1990), A traditional interpretation of macroeconomic fluctuations, American Economic Review, vol.79, no. 5, p.1146–1164.
Blanchard, O. and D. Quah (1989), The dynamic effects of aggregate demand and aggregate supply shocks, American Economic Review, vol.79, no. 4, p.655–673.
Gali, J. (1992), How well does the IS-LM model fit post-war U.S. data, Quarterly Journal of Economics, vol.107, p.975–1009.
Gerlach, S. and F. Smets (1995), The monetary transmission mechanism: Evidence from the G7 Countries, BIS Discussion Paper no.26.
Gordon, D. and E. Leeper (1994), The dynamic impacts of monetary policy: An exercise in tentative identification, Journal of Political Economy, vol.102(6), p.1228–1247.
Kim, S. (2001), Effects of monetary policy shocks on the trade balance in small open European countries, Economic Letters, vol.71, p.197–203.
Leeper, E., C. Sims and T. Zha (1996), What does monetary policy do? Brookings Papers on Economic Activity, vol.1996, no.2, p.1–63.
Rudebusch, G. (1998), Do measures of monetary policy in a VAR make sense?, International Economic Review, vol.39, no.4, p.933–940.
Sims, C. (1992), Interpreting the macroeconomic time series facts: The effects of monetary policy, European Economic Review, vol.36, no.5, p.975–1000.
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2008 Physica-Verlag Heidelberg
About this chapter
Cite this chapter
van Aarle, B. (2008). Budgetary spillovers and short-term interest rates. In: Economic Spillovers, Structural Reforms and Policy Coordination in the Euro Area. Contributions to Economics. Physica-Verlag HD. https://doi.org/10.1007/978-3-7908-1970-0_2
Download citation
DOI: https://doi.org/10.1007/978-3-7908-1970-0_2
Publisher Name: Physica-Verlag HD
Print ISBN: 978-3-7908-1969-4
Online ISBN: 978-3-7908-1970-0
eBook Packages: Business and EconomicsEconomics and Finance (R0)