Optimal Fiscal Policy Rules in a Monetary Union

37 Pages Posted: 15 Jun 2006

See all articles by David Vines

David Vines

University of Oxford - Balliol College - Department of Economics; Australian National University (ANU); Centre for Economic Policy Research (CEPR)

Tatiana Kirsanova

University of Glasgow

Mathan Satchi

University of Kent - Department of Economics

Simon Wren-Lewis

University of Oxford - Economics Department

Multiple version iconThere are 2 versions of this paper

Date Written: March 2006

Abstract

This paper investigates the importance of fiscal policy in providing macroeconomic stabilisation in a monetary union. We use a microfounded New Keynesian model of a monetary union which incorporates persistence in inflation and non-Ricardian consumers, and derive optimal simple rules for fiscal authorities. We find that fiscal policy can play an important role in reacting to inflation and output, but that not much is lost if national fiscal policy is restricted to react only to national differences in inflation and output.

Keywords: Optimal monetary policy and fiscal policies, monetary union, simple rules

JEL Classification: E52, E61, E63, F41

Suggested Citation

Vines, David and Kirsanova, Tatiana and Satchi, Mathan and Wren-Lewis, Simon J.Q., Optimal Fiscal Policy Rules in a Monetary Union (March 2006). CEPR Discussion Paper No. 5533, Available at SSRN: https://ssrn.com/abstract=909275

David Vines (Contact Author)

University of Oxford - Balliol College - Department of Economics ( email )

Manor Road
Oxford, OX1 3BJ, Oxfordshire OX13UQ
United Kingdom
+44 1865 271 067 (Phone)
+44 1865 271 094 (Fax)

Australian National University (ANU)

Canberra, Australian Capital Territory
Australia

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Tatiana Kirsanova

University of Glasgow ( email )

Adam Smith Business School
Glasgow, Scotland G12 8LE
United Kingdom

Mathan Satchi

University of Kent - Department of Economics ( email )

Keynes College
Kent, CT2 7NP
United Kingdom

Simon J.Q. Wren-Lewis

University of Oxford - Economics Department ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
23
Abstract Views
615
PlumX Metrics