Fiscal policy cyclicality and sovereign risk premia

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Title: Fiscal policy cyclicality and sovereign risk premia
Author: Kilponen, Juha
Series: Bank of Finland. Bulletin. Monetary policy and the global economy
Series number: 4
Year of publication: 2012
Pages: 49-58
Keywords: valtionvelka; joukkovelkakirjat; riskit; preemiot; finanssipolitiikka; suhdanteet; hinnat; mallit; rahapolitiikka; vakaus;
Abstract: A countercyclical fiscal policy is beneficial to the economy, as it smoothes out business cycle fluctuations and reduces government debt servicing costs. If, on the other hand, fiscal policy is procyclical, this hampers the capacity of monetary policy to foster macroeconomic stability. This being the case, decisions by euro area member countries that enhance fiscal discipline will increase stability in the euro area.

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