Fiscal and macroprudential policies in a monetary union

Boscá, José E.; Ferri, Javier; Rubio, Margarita

Abstract

In the European Monetary Union (EMU), monetary policy is determined by the European Central Bank (ECB). This arrangement can give rise to certain national economic imbalances that may potentially be addressed through national policies. Traditionally, fiscal policy has been the primary tool to correct these imbalances. However, following the global financial crisis (GFC), a new policy tool has emerged: national macroprudential policies, which aim to mitigate financial risks. This situation raises an intriguing research question: How do macroprudential and fiscal policies interact? Through their influence on real interest rates and economic activity, discretionary macroprudential policies can impact the trajectory of public debt and may necessitate fiscal adjustments, such as tax rate increases, to stabilize the public debt-to-GDP ratio. In a monetary union, a domestic macroprudential shock generates significant cross-border financial effects and also influences the fiscal stance of foreign countries. Furthermore, discretionary government spending policies have an impact on housing prices and households debt. Therefore, the responsiveness of macroprudential policy to changes in housing prices affects the fiscal multiplier.

Citation

Boscá, J. E., Ferri, J., & Rubio, M. (2025). Fiscal and macroprudential policies in a monetary union. Review of Quantitative Finance and Accounting, 65, 365-399. https://doi.org/10.1007/s11156-024-01376-z

• Journal Article Type: Article
• Acceptance Date: Oct 21, 2024
• Online Publication Date: Nov 26, 2024
• Publication Date: 2025-07
• Deposit Date: Oct 22, 2024
• Publicly Available Date: Nov 27, 2025
• Journal: Review of Quantitative Finance and Accounting
• Print ISSN: 0924-865X
• Electronic ISSN: 1573-7179
• Publisher: Springer Verlag
• Peer Reviewed: Peer Reviewed
• Volume: 65
• Pages: 365-399
• DOI: https://doi.org/10.1007/s11156-024-01376-z
• Keywords: Monetary union; Macroprudential policy; Fiscal policy; Monetary policy; Fiscal multiplier
• Public URL: https://nottingham-repository.worktribe.com/output/40859214
• Publisher URL: https://link.springer.com/article/10.1007/s11156-024-01376-z#