Expansionary or restrictive policies in the Eurozone? Dominating trends in the first two decades

Abstract

Our aim is to identify periods of restrictive versus expansionary economic policy in the euro area in the last two decades. We firstly conducted the study for identifying the dominant trend in fiscal policies and then in monetary policies. We studied several fiscal outputs, focusing on the cyclical adjusted primary balance. We also analysed the European long-term and short-term interest rates. The study was conducted for several windows, namely for 3-, 4- and 5-year periods. Additional procedures were conducted for robustness checks, namely the study of structural breaks in the analysed time series as well as a study of them recurring to Markov-Switching Regimes models. For most of the analysed periods and subperiods of the series, we concluded for the presence of expansionary policies either in the fiscal or in monetary European domains. Finally, the results and the analysis of dependencies in the euro area economy favour the evidence that economic authorities in the euro area have sought to coordinate monetary and fiscal policy to stabilise the economy.

Determinants of Inclusive Growth in the Context of the Theory of Sustainable Finance in the European Union Countries

“…The Nordic countries are at the top of the inclusive growth index in each of the analyzed years, showing high economic and social performance among the EU countries. These economies follow restrictive fiscal policies [79] to stimulate economic growth. Moreover, they are in the top positions in terms of GDP per capita, labor productivity, and employment rates among developed economies.…”

Financialization: curse or salvation? The case of Latvia, a small and post-transition economy

“…Love (2003), Beck and Levine (2004), Gilchrist and Himmelberg (1995), Merton (1995) and Levine (2005) argued that development of financial markets facilitates the efficient allocation of investment resources and alleviates financing constraints of enterprises, which in turn allow them to reach higher levels of efficiency and growth that lead to higher economic growth. Financialization effects that influence economic growth are also related to the decisions of the central bank and the government as part of the monetary and fiscal policy (policy mix) (Stawska, Mourao, 2021). Monetary and fiscal policy certainly affect economic growth, for example, through the level of investment.…”