The Spectre of Financial Dominance in the Eurozone

Benigno, Pierpaolo; Canofari, Paolo; Di Bartolomeo, Giovanni; Messori, Marcello (2023). The Spectre of Financial Dominance in the Eurozone. Italian economic journal, 10(1), pp. 59-80. Springer 10.1007/s40797-023-00225-7

Text s40797-023-00225-7.pdf - Published Version Restricted to registered users only Available under License Publisher holds Copyright. Download (396kB) | Request a copy

Differently from previous crises, the European institutions responded promptly to the Covid-19 pandemic by implementing an appropriate policy mix. However, this policy mix has proven to be insufficient for reducing the risks of financial instability in the European Union due to the temporary horizon of the centralised fiscal policy and the persistence of adverse shocks. In fact, the impact of the pandemic was exacerbated by the dramatic consequences of the war in Ukraine. The possible inefficiencies in implementing the Next Generation-EU (NG-EU) and an inadequate response to the Ukraine crisis could trigger, at best, the revival of financial and fiscal dominance in the euro-area economies. However, by using a simple model referred to the post-pandemic and war period, we show that the overburdening of the European Central Bank’s role would come with high costs. Hence, we argue that it is necessary to pursue sustainable development based on the successful implementation of the NG-EU and the related transformation of the one-shot centralised fiscal policy into a recurrent policy tool.

Interest & Impact

Downloads

0 since deposited on 27 Mar 2024
0 in the past 12 months

Citations

5 Citations in Web of Science ®
6 Citations in Scopus

Search

in Google Scholar™

Services

Actions (login required)

Edit item

Actions (login required)

Edit item