2026-06-03T19:23:44Zhttps://riuma.uma.es/rest/oai/requestoai:riuma.uma.es:10630/218362026-02-03T11:58:38Zcom_10630_2254col_10630_37959
RIUMA. Repositorio Institucional de la Universidad de Málaga
author
Ruiz-Ojeda, Alberto Luis
2021-05-17T10:35:33Z
2021-05-17T10:35:33Z
2021
EU policy responses to Covid-19: effects on money growth, inflation, and spending
https://hdl.handle.net/10630/21836
This working paper contains some reflections on the potential consequences of the Eurozone’s policy response to the Covid-19. Let's summarise them in the following bullet points:
• No fiscal contraction nor money supply reduction might be expected over a period of 3-4 years. Both government deficit/debt and M3 aggregate might continue to rise to even more unprecedented amounts, at least in peacetime. The ECB’s balance-sheet operations would accompany public budget expansions to prevent the Eurozone’s government´s policies from financial market punishment.
• As a result, austerity policies, based on fiscal contractions (public spending reduction and tax cuts) are not in the Eurozone’s medium-long run horizon. Taxes simply take resources away from productive activities and cause distortions to market operators. Aggregate demand multipliers are formidable theoretical artefacts that take for granted the absence of pro-cyclical effects. A great deal of research has recently been done to refute the Keynesian tradition on the robust historical dataset.
• Getting back to monetary stability would be much tougher for the Eurozone than it should be in rational terms. Sadly, I recognise that the EU’s constitutional counterfeits facilitate rather than refrain from monetary disequilibria. In the absence of an EU centralised (federal), lithe governmental decision-making (comitology is omnipresent), the ECB rises like the saviour for all seasons in the shape of a universal liquidity provider.
• Effectively, double-digit inflation would be the inevitable consequence of the failure of a rule-based monetary strategy for the Eurozone. Along with it, weak productivity recovery and private sector zombification pave the path to Japan-like stagflation.
eng
Attribution-NonCommercial-NoDerivatives 4.0 Internacional
COVID-19
Política monetaria
Política fiscal
Inflación
Déficit público
Deuda pública
Gasto público
EU policy responses to Covid-19: effects on money growth, inflation, and spending
conference output
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URL
https://riuma.uma.es/bitstreams/84161102-69e7-4145-807b-a8e9957bb3fb/download
File
MD5
29056d94d0df1b44a1280ea6a2d9f39b
526708
application/pdf
Policy responses to Covid-19 (Essay Alberto Ruiz-Ojeda) FV.pdf