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Macroeconomic Policy Interaction under EMU: A Dynamic Game Approach

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  • Bas Van Aarle
  • Jacob Engwerda
  • Joseph Plasmans
  • Arie Weeren

Abstract

In this article, we study macroeconomic stabilization in the Economic and Monetary Union (EMU) using a dynamic game approach. With the aid of a stylized macroeconomic model, this article analyzes the transmission and interaction of national fiscal policies and monetary policy of the European Central Bank (ECB) in the EMU. A special focus is on the effects of labor market institutions in the participating countries and of the introduction of fiscal stringency criteria like those imposed in the Stability and Growth Pact. Copyright Kluwer Academic Publishers 2001

Suggested Citation

  • Bas Van Aarle & Jacob Engwerda & Joseph Plasmans & Arie Weeren, 2001. "Macroeconomic Policy Interaction under EMU: A Dynamic Game Approach," Open Economies Review, Springer, vol. 12(1), pages 29-60, January.
    • Handle: RePEc:kap:openec:v:12:y:2001:i:1:p:29-60
    DOI: 10.1023/A:1026507026304
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    17. Engwerda, J.C. & van Aarle, B. & Plasmans, J.E.J., 1998. "Fiscal Policy Interaction in the EMU," Other publications TiSEM cf06aa07-2ed0-40ab-8ec1-d, Tilburg University, School of Economics and Management.
    18. Demertzis, Maria & Hallett, Andrew Hughes, 1998. "Asymmetric transmission mechanisms and the rise in European unemployment: A case of structural differences or of policy failures?," Journal of Economic Dynamics and Control, Elsevier, vol. 22(6), pages 869-886, June.
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    Citations

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    Cited by:

    1. Creel, Jerome & Capoen, Fabrice & Cussy, Pascal & Lenoble-Liaud, Helene, 2003. "How to manage financial shocks: Intra-European vs. international monetary coordination," Journal of Macroeconomics, Elsevier, vol. 25(4), pages 431-455, December.
    2. Bas van Aarle & Jacob Engwerda & Joseph Plasmans, 2002. "Monetary and Fiscal Policy Interaction in the EMU: A Dynamic Game Approach," Annals of Operations Research, Springer, vol. 109(1), pages 229-264, January.
    3. Frank Bohn, 2004. "Monetary Union and the Interest-Exchange Rate Trade-off," Open Economies Review, Springer, vol. 15(2), pages 111-141, April.
    4. MENGUY, Séverine, 2023. "Stabilization of supply shocks in a structurally heterogeneous monetary union✰," Research in Economics, Elsevier, vol. 77(3), pages 362-389.
    5. Hubert Kempf, 2021. "Fiscal Federalism in a Monetary Union: The No-Cooperation Pitfall," Open Economies Review, Springer, vol. 32(1), pages 109-151, February.
    6. Jerome Creel & Henri Sterdyniak, 2002. "The fiscal theory of the price level and sluggish inflation: how important shall the wealth effect be?," Documents de Travail de l'OFCE 2002-01, Observatoire Francais des Conjonctures Economiques (OFCE).
    7. Herzog, Bodo, 2006. "Coordination of fiscal and monetary policy in CIS-countries: A theory of optimum fiscal area?," Research in International Business and Finance, Elsevier, vol. 20(2), pages 256-274, June.
    8. repec:hal:wpspec:info:hdl:2441/2972 is not listed on IDEAS
    9. Bas van Aarle & Giovanni Di Bartolomeo & Jacob Engwerda & Joseph Plasmans, 2002. "Monetary and Fiscal Policy Design in the EMU: An Overview," Open Economies Review, Springer, vol. 13(4), pages 321-340, October.
    10. PLASMANS, Joseph & MEERSMAN, Hilde & VAN POECK, André & MERLEVEDE, Bruno, 1999. "Generosity of the unemployment benefit systern and wage flexibility in EMU: Time- varying evidence in five countries," Working Papers 1999043, University of Antwerp, Faculty of Business and Economics.
    11. Plasmans, J.E.J., 2001. "The Effects of Fiscal and Monetary Policy in an Open Economy : A Case of EU, the USA and Japan," Other publications TiSEM 26fda6a3-5cc0-43a3-894a-d, Tilburg University, School of Economics and Management.
    12. repec:dau:papers:123456789/3304 is not listed on IDEAS
    13. Fritz Breuss & Andrea Weber, 1999. "Economic Policy Coordination in the EMU: Implications for the Stability Pact," EUI-RSCAS Working Papers 26, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
    14. repec:spo:wpecon:info:hdl:2441/2972 is not listed on IDEAS
    15. repec:hal:spmain:info:hdl:2441/2972 is not listed on IDEAS
    16. van Aarle, B. & Di Bartolomeo, G. & Engwerda, J.C. & Plasmans, J.E.J., 2001. "Monetary and fiscal policy design in the EMU using a dynamic game approach : An overview," Other publications TiSEM 355822b0-4ad6-4792-b0d6-7, Tilburg University, School of Economics and Management.
    17. Oliver Grimm & Stefan Ried, 2007. "Macroeconomic Policy in a Heterogeneous Monetary Union," CER-ETH Economics working paper series 07/67, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.

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