Monetary-Fiscal Policy Coordination in the Euro Area under US Financial Shocks: A Structural Analysis Using the Euro Area  Block of the Global Macro-Financial Model

Monetary-Fiscal Policy Coordination in the Euro Area under US Financial Shocks: A Structural Analysis Using the Euro Area Block of the Global Macro-Financial Model | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Monetary-Fiscal Policy Coordination in the Euro Area under US Financial Shocks: A Structural Analysis Using the Euro Area Block of the Global Macro-Financial Model Langfeng Zhou This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-7481831/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract This paper investigates the coordination of monetary and fiscal policies in the Euro Area in response to financial shocks originating from the United States, with a focus on the post-Global Financial Crisis period. Using a structurally estimated Global Macro-Financial Model, we analyze the transmission channels of US financial disturbances and assess the effectiveness of discretionary versus rule-based policy frameworks. Our results reveal heightened sensitivity of Euro Area financial markets and a constrained monetary policy environment after the crisis, which elevates the role of fiscal policy in stabilization efforts. Coordinated discretionary interventions, particularly led by monetary policy and supported by fiscal measures, deliver the most effective stabilization of stock markets and inflation, albeit with some temporary volatility in real GDP and unemployment. In contrast, rule-based policies offer moderate but more predictable outcomes, reflecting a trade-off between policy flexibility and credibility. These findings contribute to the literature on international macro-financial linkages and provide practical implications for policymakers navigating external financial shocks in an increasingly interconnected global economy. Monetary-Fiscal Coordination US Financial Shocks Euro Area Discretionary Policy Rule-Based Policy Global Macro-Financial Model. JEL Classification: E44 E62 F42 G01 Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. 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Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-7481831","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":513515285,"identity":"159a40f5-3b6b-44d0-adb7-ea4bf6fccb3c","order_by":0,"name":"Langfeng Zhou","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAAArElEQVRIiWNgGAWjYBACPgYeIGkgIccH5rIRoYUNrKXAwpiNRC0fKhLbiNfCf/bgYx4DifQ2/jMGDB/KDhNjy7lkY6CW3DaJHAPGGeeI0cLYYyYN0cJjwMzbRowWZh6wlnQ2oMOY/xKlhQ2iJYGNIceAmZEoLTw8xoZzDCQM2yTSCg72nEsnrIWf/4zhgzd/6uT5+Q9vfPCjzJqwFhRwgET1o2AUjIJRMApwAQB5SyrGHZHrAwAAAABJRU5ErkJggg==","orcid":"","institution":"Louisiana State University","correspondingAuthor":true,"prefix":"","firstName":"Langfeng","middleName":"","lastName":"Zhou","suffix":""}],"badges":[],"createdAt":"2025-08-28 15:38:37","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-7481831/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-7481831/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":104403307,"identity":"86071fe3-aa4a-4672-9575-49d7dd5c631f","added_by":"auto","created_at":"2026-03-11 12:18:00","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":1053041,"visible":true,"origin":"","legend":"","description":"","filename":"monetaryandfiscalcoordinationsubmission.pdf","url":"https://assets-eu.researchsquare.com/files/rs-7481831/v1_covered_24af88e5-58bc-4a5e-9745-44055582d0c0.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"Monetary-Fiscal Policy Coordination in the Euro Area under US Financial Shocks: A Structural Analysis Using the Euro Area Block of the Global Macro-Financial Model","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":false,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"Monetary-Fiscal Coordination, US Financial Shocks, Euro Area, Discretionary Policy, Rule-Based Policy, Global Macro-Financial Model. 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