Eurozone inflation affects fiscal policy, ECB paper finds
Authors say there is evidence of “turning point” for inflation’s impact on primary fiscal balances
A working paper published by the European Central Bank tracks the relationship between eurozone inflation and member states’ fiscal balance.
In Inflation and fiscal policy: is there a threshold effect in the fiscal reaction function?, Clémence Briodeau and Cristina Checherita-Westphal look at data on the eurozone from 1999 to 2022.
The paper estimates a fiscal reaction function framework for eurozone countries. The authors find evidence that changes in the harmonised index of consumer prices
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