Monetary and Fiscal Policy Interaction in the Euro Area with Different Assumptions on the Phillips Curve
Wuerzburg Economic Working Paper No. 40
41 Pages Posted: 7 Mar 2004
There are 2 versions of this paper
Monetary and Fiscal Policy Interaction in the Euro Area with Different Assumptions on the Phillips Curve
Monetary and Fiscal Policy Interaction in the Euro Area with Different Assumptions on the Phillips Curve
Date Written: October 2003
Abstract
In this paper we carry over a static version of a New Keynesian Macro Model developed in previous papers (see Bofinger, Mayer, and Wollmershauser 2002) to a monetary union. For a similar approach see (Uhlig 2002). We will show in particular that a harmonious functioning of a monetary union critically depends on the correlation of shocks that hit the currency area. Additionally a high degree of integration in product markets is advantageous for the ECB as it prevents that national real interest rates can drive a wedge between macroeconomic outcomes across member states. In particular small countries are in a vulnerable position exposed to asymmetric shocks and therefore in need for fiscal policy as an independent stabilization agent with room to breath.
Keywords: monetary policy, inflation targeting, fiscal policy, policy coordination, free-riding
JEL Classification: E50, E60, H70
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Symbiosis of Monetary and Fiscal Policies in a Monetary Union
By Avinash Dixit and Luisa Lambertini
-
Interactions of Commitment and Discretion in Monetary and Fiscal Policies
By Luisa Lambertini and Avinash Dixit
-
One Money, But Many Fiscal Policies in Europe: What are the Consequences?
By Harald Uhlig
-
One Money, But Many Fiscal Policies in Europe: What are the Consequences?
By Harald Uhlig
-
Is Fiscal Policy Coordination in Emu Desirable?
By Roel M. W. J. Beetsma, Xavier Debrun, ...
-
Is Fiscal Policy Coordination in Emu Desirable?
By Roel M. W. J. Beetsma, Xavier Debrun, ...
-
Is Fiscal Policy Coordination in Emu Desirable?
By Roel M. W. J. Beetsma, Xavier Debrun, ...
-
Fiscal Discretion Destroys Monetary Commitment
By Avinash Dixit and Luisa Lambertini
-
The Gains from Fiscal Cooperation in the Two Commodity Real Trade Model
-
Model Uncertainty, Learning, and the Gains from Coordination
By Atish R. Ghosh and Paul R. Masson