Fiscal policy cyclicality and sovereign risk premia
Kilponen, Juha (02.10.2012)
Numero
4Julkaisija
Bank of Finland
2012
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:bof-201408073684Tiivistelmä
A countercyclical fiscal policy is beneficial to the economy, as it smoothes out business cycle fluctuations and reduces government debt servicing costs. If, on the other hand, fiscal policy is procyclical, this hampers the capacity of monetary policy to foster macroeconomic stability. This being the case, decisions by euro area member countries that enhance fiscal discipline will increase stability in the euro area.