Designing the fiscal-monetary nexus: policy options for the EU. Issue 1 (2nd January 2023)

• Record Type: Journal Article
• Authors: Dietsch, Peter
• Is Part Of: Review of social economy. Volume 81:Issue 1(2023)
• Page Start: 154
• Page End: 171
• Publication Date: 2023-01-02
• Subjects: Unconventional monetary policy -- fiscal policy -- European Central Bank -- inequality -- distributive justice; Economics -- Periodicals; Economics -- Moral and ethical aspects -- Periodicals; Social justice -- Periodicals; 330.5
• DOI: 10.1080/00346764.2021.1938191
• Languages: English
• ISSNs: 0034-6764

Abstract

Abstract : In recent decades, and in particular since the shift towards independent central banks, there has been no explicit coordination of fiscal and monetary policy. In the Eurozone, this lack of coordination represents an important flaw, especially since the Eurozone is not an optimal currency area. Complementing monetary union with a transfer union represents one possible solution. This paper argues that the negative impact of post-2008 and post-Covid-19 unconventional monetary policy on income inequalities provides a second reason to coordinate fiscal and monetary policy. Among various institutional arrangements to implement such coordination, the paper defends the idea that the European Central Bank should be sensitive to distributive considerations when formulating its monetary policy. Such an arrangement would help both to contain the distributive side-effects of monetary policy and to at least partially remedy the flaw at the heart of the Eurozone as long as an outright transfer union remains unfeasible.