Policy Mix and Economic Performance in Euro Area

Hounaida Daly
Hounaida Daly * §
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Mounir Smida
Mounir Smida
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§ University of Sousse University of Sousse

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Policy Mix and Economic Performance in Euro Area

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Abstract

Lack of coordination between the monetary and fiscal authorities will result in inferior overall economic performance. This paper studies the interactions between monetary and fiscal policies and its effect on the economic performance by using al cointegration tests in the case of Euro Area. This paper examines the causal relationship between output gap, public debt, budget deficit, interest rate and inflation rate, and the impact of monetary policy on public debt management, in Euro Area from 1999Q1 to 2013Q4. The evidence supports the idea that the monetary policy is more stabilizing in its influence on the economic activity than the budget policy. The particular stance of monetary policy affects the capacity of the government to finance the budget deficit by changing the cost of debt service and limiting or expanding the available sources of financing. The result does not let hear strong political coordination in Euro Area, a weak policy stance in one policy area burdens the other area and is unsustainable in the long term.

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

Data Availability

Not applicable for this article.

How to Cite This Article

Hounaida Daly, Mounir Smida. 2014. "Policy Mix and Economic Performance in Euro Area". Global Journal of Management and Business Research, Global Journal of Management and Business Research - B: Economic & Commerce GJMBR-B Volume 14 (GJMBR Volume 14 Issue B8).

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Journal Specifications

Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

Keywords
budget deficiteuro areafiscal policymonetary policypolicy mixpublic debt
Classification
GJMBR-B Classification JEL Code: N10
  • Submission ReceivedDecember 10, 2013
  • Peer Review Double Blind
    Handling Editor
  • Accepted January 4, 2014
  • Published January 15, 2014
Version of record

v1.2

Issue date
December 25, 2014

Language
English
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Policy Mix and Economic Performance in Euro Area

Hounaida Daly
Hounaida Daly University of Sousse
Mounir Smida
Mounir Smida
  • Submission ReceivedDecember 10, 2013
  • Peer Review Double Blind
    Handling Editor
  • Accepted January 4, 2014
  • Published January 15, 2014