Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/217666
Authors: 
Dumičić, Mirna
Year of Publication: 
2019
Citation: 
[Journal:] Journal of Central Banking Theory and Practice [ISSN:] 2336-9205 [Volume:] 8 [Issue:] 1 [Publisher:] De Gruyter Open [Place:] Warsaw [Year:] 2019 [Pages:] 97-109
Publisher: 
De Gruyter Open, Warsaw
Abstract: 
This paper identifies and describes some of the main channels through which fiscal policy is linked to financial stability. For that purpose, several features of public debt related to financial stability are explored, such as public debt management and its sustainability, government’s funding costs and their impact on costs of funding for private sector, financial institutions’ exposures to the government etc. The part related to the tax policy elaborates on its countercyclical capacity, the role of automatic stabilizers, tax incentives that encourage or discourage certain type of financing, and impact of tax reliefs on systemic risks, particularly those targeted at the real estate. Fiscal policy role during the periods of strong capital inflows is also described from the financial stability point of view, which is followed by the overview of fiscal and quasi-fiscal costs of financial instability.Specific problem of different time horizon of economic policymakers’, which is in the case of fiscal policy usually related to election cycles and thus negatively affects its countercyclical capacity, is also explored. Given the relevance of the identified channels for financial stability, it can be expected that macroprudential capacity of fiscal policy will gain much more attention in the future research and policy work.
Subjects: 
fiscal policy
financial stability macroprudential policy
systemic risks
JEL: 
E60
E62
E58
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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