Macroeconomic stabilization through monetary and fiscal policy coordination: Implications for European Monetary Union
AbstractIn a two-country model, we consider the implications of monetary and fiscal policy coordination for macroeconomic stabilization. We show that the optimal regime is one of monetary and fiscal policy coordination under flexible exchange rates. In the context of the European Community, this suggests that the desire to fix exchange rates may not be costless. In addition, we show that fiscal coordination requires a relatively high degree of flexibility in fiscal policy. This result suggests that limits on the flexibility of fiscal policies, as suggested in the Delors Report, may hinder macroeconomic stabilization. Copyright Kluwer Academic Publishers 1994
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Bibliographic InfoArticle provided by Springer in its journal Open Economies Review.
Volume (Year): 5 (1994)
Issue (Month): 4 (October)
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Web page: http://www.springerlink.com/link.asp?id=100323
International policy coordination; exchange rate regimes; European Monetary Union;
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