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Euro Area Periphery Countries' Fiscal Policy and Monetary Policy Surprises *
Author(s) -
Hülsewig Oliver,
Rottmann Horst
Publication year - 2022
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/obes.12486
Subject(s) - economics , monetary policy , monetary economics , fiscal policy , bond , sovereignty , balance (ability) , finance , politics , political science , medicine , law , physical medicine and rehabilitation
We estimate local projections to explore how fiscal policy in euro area periphery countries responds to monetary policy shocks that lower sovereign bond yields. In particular, we assess whether the disciplining effect of financial markets on public finances is undermined by the ability of monetary policy to affect the conditions of external funds. We find that the fiscal balance, on average, improves in response to monetary policy surprises that bring down yields on sovereign bonds.