Policy Mix and Economic Performance in Euro Area

Policy Mix and Economic Performance in Euro Area

Hounaida Daly

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Mounir Smida

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University of Sousse

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

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How to Cite This Article

Hounaida Daly. 2014. \u201cPolicy Mix and Economic Performance in Euro Area\u201d. Global Journal of Management and Business Research - B: Economic & Commerce GJMBR-B Volume 14 (GJMBR Volume 14 Issue B8).

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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 deficit euro area fiscal policy monetary policy policy mix public debt

Submission ReceivedDecember 10, 2013
Peer Review Double Blind
Handling Editor
Accepted January 4, 2014
Published January 15, 2014

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v1.2

Issue date

December 25, 2014

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Article Matrices

Total Score: 102

Country: Tunisia

Subject: Global Journal of Management and Business Research - B: Economic & Commerce

Authors: Hounaida Daly, Mounir Smida (PhD/Dr. count: 0)

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