Specificity of Fiscal Policy in the Monetary Union

The condition of the optimal currency area as a theoretical basis of the monetary integration considers the harmonization of the fiscal and monetary policy crucial in achieving the efficient functioning of the monetary union. The issue of sustainability of the monetary union without fiscal union re...

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Main Author: Branka Topić-Pavković
Format: Article
Language:English
Published: University of Banja Luka, Faculty of Economics 2018-10-01
Series:Acta Economica
Subjects:
Online Access:http://ae.ef.unibl.org/index.php/AE/article/view/360
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spelling doaj-88e176939ed548c4ac116605ef9b0da12020-11-24T22:11:29ZengUniversity of Banja Luka, Faculty of Economics Acta Economica1512-858X2232-738X2018-10-01162810.7251/ACE1828097TSpecificity of Fiscal Policy in the Monetary UnionBranka Topić-Pavković0University of Banja Luka, Faculty of Economics, Banja Luka The condition of the optimal currency area as a theoretical basis of the monetary integration considers the harmonization of the fiscal and monetary policy crucial in achieving the efficient functioning of the monetary union. The issue of sustainability of the monetary union without fiscal union reaches real intensity in times of crisis and market instability. In that context, this paper focuses on the relation of uncoordinated fiscal policies and non-fulfillment of the fiscal criteria of convergence with the functioning and sustainability of the monetary union. The aim of this research is to establish whether, based on the analysed theoretical assumptions and empirical case, the fiscal criteria are respected in practice in the member countries, and how specificity of the fiscal policy influences the monetary integration especially in the years of crisis. We started research with the cost-benefit analysis of the monetary union pointing out to the specific costs and benefits occurring when a country joins the monetary union. We examined the fiscal parameters of the convergence criteria of the member states pointing to the problem of heterogeneity of members and deviations from the reference values of the Union. The results show that the metodology used to establish the set norms of the fiscal convergence cannot correspond symetrically to all member countries. The results also point to the fact that, unlike symmetrical, in the emergence of asymmetric shocks, i.e. disorders that affect various countries differently, membership in the monetary union becomes more expensive because of the inability to conduct monetary policy. http://ae.ef.unibl.org/index.php/AE/article/view/360monetary integrationfiscal policyconvergence criteriabudgetpublic debtfiscal discipline
collection DOAJ
language English
format Article
sources DOAJ
author Branka Topić-Pavković
spellingShingle Branka Topić-Pavković
Specificity of Fiscal Policy in the Monetary Union
Acta Economica
monetary integration
fiscal policy
convergence criteria
budget
public debt
fiscal discipline
author_facet Branka Topić-Pavković
author_sort Branka Topić-Pavković
title Specificity of Fiscal Policy in the Monetary Union
title_short Specificity of Fiscal Policy in the Monetary Union
title_full Specificity of Fiscal Policy in the Monetary Union
title_fullStr Specificity of Fiscal Policy in the Monetary Union
title_full_unstemmed Specificity of Fiscal Policy in the Monetary Union
title_sort specificity of fiscal policy in the monetary union
publisher University of Banja Luka, Faculty of Economics
series Acta Economica
issn 1512-858X
2232-738X
publishDate 2018-10-01
description The condition of the optimal currency area as a theoretical basis of the monetary integration considers the harmonization of the fiscal and monetary policy crucial in achieving the efficient functioning of the monetary union. The issue of sustainability of the monetary union without fiscal union reaches real intensity in times of crisis and market instability. In that context, this paper focuses on the relation of uncoordinated fiscal policies and non-fulfillment of the fiscal criteria of convergence with the functioning and sustainability of the monetary union. The aim of this research is to establish whether, based on the analysed theoretical assumptions and empirical case, the fiscal criteria are respected in practice in the member countries, and how specificity of the fiscal policy influences the monetary integration especially in the years of crisis. We started research with the cost-benefit analysis of the monetary union pointing out to the specific costs and benefits occurring when a country joins the monetary union. We examined the fiscal parameters of the convergence criteria of the member states pointing to the problem of heterogeneity of members and deviations from the reference values of the Union. The results show that the metodology used to establish the set norms of the fiscal convergence cannot correspond symetrically to all member countries. The results also point to the fact that, unlike symmetrical, in the emergence of asymmetric shocks, i.e. disorders that affect various countries differently, membership in the monetary union becomes more expensive because of the inability to conduct monetary policy.
topic monetary integration
fiscal policy
convergence criteria
budget
public debt
fiscal discipline
url http://ae.ef.unibl.org/index.php/AE/article/view/360
work_keys_str_mv AT brankatopicpavkovic specificityoffiscalpolicyinthemonetaryunion
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