AD ALTA
JOURNAL OF INTERDISCIPLINARY RESEARCH
probability of 95% that the real GG deficit had a statistically
significantly influence on the first differences of the real GDP in
euro area in 1999 – 2016.
In the table 7 the independent variables in the analysis were the
ECB’s main interest rate [IR_ECB] and the nominal ECB main
interest rate lagged by one year [IR_ECB_1]; the dependent
variable was the GDP growth in the euro area [GDP_growth].
Table 7 The dependent variable (Y): GDP_growth; independent
variables (X) – IR_ECB and IR_ECB_1
Variable
name
Coefficient
Standard
error
t- Student
p-value
Const
1,49188
0,472299
3,1588
0,0070***
IR_ECB
2,20163
0,354524
6,2101
<0,0001***
IR_ECB_1
−2,13887
0,373212
−5,7310
<0,0001***
Selected regression statistics and analysis of variance; n=17 observations from
2000-2016
SD of the dependent variable 1,894109; Standard error of residuals = 1,038952
R-square 0,736737
F(2, 14) 19,58939 p-value for F test 0,000088
Source: own elaboration based on [Eurostat, OECD].
An analysis of the data in table 7 leads to a conclusion that the
ECB’s nominal interest rate and the nominal ECB interest rate
lagged by one year had a statistically significant influence on the
GDP growth in the euro area. In this case, the t-Student statistics
are 6,2101 and -5,7310 at the same p-values of 0.0001
(<p=0.05), meaning that in the period under consideration the
ECB’s nominal main interest rate and the ECB nominal main
interest rate lagged by one year rate
had a statistically significant
influence on the GDP growth. The numbers also indicate a
probability of 95% that the ECB`s nominal interest rate and
ECB`s nominal rate lagged by one year had a statistically
significantly influence on the GDP growth in euro area in 1999 –
2016.
The coefficient for the ECB nominal main interest rate is
positive (2,20163), meaning that the Polish GDP increased
following rises in the euro area’s main nominal interest rate,
which could have been affected by crisis phenomena and
inflation expectations in the analysed period. The negative value
of the coefficient (−2,13887) for the first rate indicates that the
relationship between nominal interest rate of ECB lagged by one
year and GDP growth was consistent with economic theory.
The results of the analysis indicate that in the sampled years
instruments of monetary policy of the central bank and
instruments of fiscal policy of governments in the euro area had
a statistically significant impact on basic macroeconomic
variables in the euro area such as inflation, real GDP or GDP
growth. As monetary policy and fiscal policy play a significant
role in economies of euro area countries, the European Central
Bank and governments of euro area countries need to be watched
carefully for changes in their instruments.
4 Conclusions
The nominal main interest rates (as instrument of monetary
policy) that in the years 1999-2016 were already relatively low
in the euro area, after 2008, in the wake of the crisis, moved
much closer to the zero bound (between 2009 and 2014 the main
refinancing operation rate in the euro area decreased from 1.44%
to 0.10%). Fiscal policy became more expansionary in that
period, expanding GG deficit and debt (as instruments of fiscal
policy). It seems that because of financial crisis an expansionary
monetary policy was accompanied by an expansionary fiscal
policy and that the economists may be right that fiscal expansion
is greater during a crisis.
The analysis of interactions between the monetary authority and
the fiscal authority performed in the context of low interest rates
shows that the crisis caused the ECB to cut interest rates more
frequently (i.e. to adopt an expansionary monetary policy) and
the governments of many euro-area countries chose to stimulate
total demand using an expansionary fiscal policy that increased
public deficit and debt (Stawska, 2017). The maintenance of
near-zero nominal interest rates frequently prevents the use of
measures counteracting deflationary shocks that affect price
levels and production.
In conclusion, the objective of the article i.e. to examine the
dependencies between policy mix instruments and selected
economic variables in the euro area economy with regard to low
interest rates, was accomplished. Furthermore, the hypothesis
stating that policy mix instruments had a statistically significant
impact on the euro area economy between 1999-2016, has been
verified positively. The analyses confirmed that the ECB main
refinancing rate (as an instrument of monetary policy)
significantly statistically affected the inflation, real GDP and
GDP growth in the euro area in the analysed period. In turn, real
GDP deficit (as an instrument of fiscal policy) had a statistically
significant impact on inflation as well as on the real GDP in the
euro area between 1999-2016.
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