Fiscal policy in monetary unions: Implications for Europe
AbstractThis paper analyzes how the feasible mix of government expenditure and financing arrangements may change with the establishment of a monetary union such as that planned by members of the European Community. We find that a monetary union reduces the feasible divergence across countries in their present discounted levels of fiscal spending. Wide differences across countries in their present and future time patterns of spending are still possible, however. Examination of the empirical evidence suggests that the movement toward greater exchange rate fixity associated with the EMS and participation in â€œquasiâ€ monetary unions havenot been accompanied by significant fiscal convergence. The experience of member states of several existing monetary unions, however, suggests that a more effective constraint to budgetary discipline arises within full-fledged unions in operation over long periods, even in the absence of binding central rules on government deficit and debt positions. Copyright Kluwer Academic Publishers 1993
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Bibliographic InfoArticle provided by Springer in its journal Open Economies Review.
Volume (Year): 4 (1993)
Issue (Month): 1 (March)
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Web page: http://www.springerlink.com/link.asp?id=100323
fiscal policy; monetary union; European economic integration;
Other versions of this item:
- Reuven Glick & Michael Hutchison, 1992. "Fiscal policy in monetary unions: implications for Europe," Working Papers in Applied Economic Theory 92-02, Federal Reserve Bank of San Francisco.
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