Strategic interactions between monetary and fiscal policies a case study for the European stability pact
Literaturverz. S.252-253
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| Veröffentlicht in: | Ifo-Institut für Wirtschaftsforschung IFO-Studien |
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| 1. Verfasser: | |
| Format: | UnknownFormat |
| Sprache: | eng |
| Veröffentlicht: |
2002
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Tag hinzufügen | Zusammenfassung: | Literaturverz. S.252-253 We extend the model of Leith and Wren-Lewis (2000) to the case of a two-country monetary union, incorporating adaptive expectations. An asymmetry between the stabilisation properties of the two fiscal policies is introduced: only one country is fiscally-constrained by the dispositions of the stability pact. Monetary and fiscal policies are set as the outcomes of a game between the two governments and the common central bank. We show that in case of negative symmetric shocks with a stringent monetary policy, the government with sound public finances is more and more fettered in his policy choices as time moves forward while the reserve is true for the fiscally-constrained government. The costs implied by the stability pact for the common central bank are also substantial. Coordinating monetary and fiscal policies after a symmetric supply shock is also shown to be sufficient to cancel the costs emerging from the pact, but it is not after a demand shock. |
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| Beschreibung: | In: Ifo-Studien |
| Beschreibung: | graph. Darst |
| ISSN: | 0018-9731 |