Tuesday | 29 Sep 2020
16 Dec 2019

The ECB is running out of policy space

Can fiscal policy help?

Daniel Gros / Angela Capolongo

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The European Central Bank is running out of instruments for addressing persistent low inflation. In this paper, we assess if a fiscal policy expansion could help the ECB reaching its target. Using ten mainstream models, we find only a modest and temporary impact of a fiscal deficit of 1% of GDP on inflation.

An earlier version was published by VoxEU.