US Macroeconomic Policy Response to COVID-19: Spillovers to the Euro Area
The United States (US) have responded to the COVID-19 shock with a massive fiscal stimulus in 2020 and 2021. At the same time, the Federal Reserve (Fed) has maintained a highly accommodative monetary policy stance. However, the Fed’s new average inflation targeting regime is being put to the test by the spike in inflation observed in recent months. Due to the global influence of the US economy and interlinkages with the euro area, questions arise over the possibility of significant spillovers from these US policy measures. Five papers were prepared by the ECON Committee’s Monetary Expert Panel, looking into the channels of Transatlantic fiscal and monetary policy spillovers and their significance in the current context. This publication is provided by Policy Department A for the Committee on Economic and Monetary Affairs (ECON), ahead of the Monetary Dialogue with ECB President Lagarde on 21 June 2021.
The paper was prepared within the framework service contract which is intended to support the work of ECON in the European Parliament by enabling it to seek independent expert advice in the field of monetary and economic affairs to support its scrutiny activity, in particular in the context of the Monetary Dialogues between ECON with the European Central Bank (ECB). Expertise is requested on a wide range of issues relevant to the work of ECON in relation to EU economic and monetary integration, including governance and institutional aspects, as appropriate.