Advanced Search
MyIDEAS: Login to save this paper or follow this series

Macroeconomic stabilisation policies in the EMU: Spillovers, asymmetries and institutions

Contents:

Author Info

  • DI BARTOLOMEO, Giovanni
  • ENGWERDA, Jacob
  • PLASMANS, Joseph
  • VAN AARLE, Bas

Abstract

This paper studies the spillover sizes and signs and the institutional design of the co-ordination of macroeconomic stabilisation policies within the European Economic and Monetary Union (EMU). Moreover, in a dynamic setup, the consequences of this institutional design on macroeconomic outcomes and policies are analysed. We distinguish two types of co-ordination: ex-ante - related to the institutional framework; and ex-post concerning the actual policy decisions. The first type is modeled as the result of an endogenous coalition formation process that leads to the formation of policymakers’ coalitions. Ex-post co-ordination implies then the implementation by each coalition of its internally coordinated macroeconomic stabilisation policies in a non-cooperative dynamic game with the other coalitions, and subject to the constraints of the internal dynamics of the EMU economy. The paper shows that the institutional setting of macroeconomic policy co-ordination is of crucial importance in reaching the Pareto-optimal equilibrium of the game, especially when the number and the magnitude of asymmetries increase. The specific recommendations depend on the particular characteristics of the shocks and the economic structure. In the case of a common shock, fiscal co-ordination is counterproductive but full policy co-ordination is desirable. When asymmetric shocks are considered, fiscal co-ordination improves the performance but full policy co-ordination doesn’t produce further gains in policymakers’ welfare. In general, structural asymmetries reduce the gains from co-operation so that in many cases co-operation cannot be supported without introduction of exogenous factors, e.g. a transfer system.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: https://www.uantwerpen.be/images/uantwerpen/container1244/files/TEW%20-%20Onderzoek/Working%20Papers/RPS/2003/RPS-2003-019.pdf
Download Restriction: no

Bibliographic Info

Paper provided by University of Antwerp, Faculty of Applied Economics in its series Working Papers with number 2003019.

as in new window
Length: 32 pages
Date of creation: Jun 2003
Date of revision:
Handle: RePEc:ant:wpaper:2003019

Contact details of provider:
Postal: Prinsstraat 13, B-2000 Antwerpen
Web page: https://www.uantwerp.be/en/faculties/applied-economic-sciences/
More information through EDIRC

Related research

Keywords: Macroeconomic stabilisation; EMU; Coalition formation; Linear quadratic differential games;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2139, C.E.P.R. Discussion Papers.
  2. Engwerda, J.C. & Aarle, B. van & Plasmans, J.E.J., 2002. "Cooperative and non-cooperative fiscal stabilization policies in the EMU," Open Access publications from Tilburg University urn:nbn:nl:ui:12-88304, Tilburg University.
  3. Roel Beetsma & Xavier Debrun & Frank Klaassen, 2001. "Is Fiscal Policy Coordination in EMU Desirable?," CESifo Working Paper Series 599, CESifo Group Munich.
  4. Aarle, B. van & Engwerda, J.C. & Plasmans, J.E.J., 2002. "Monetary and fiscal policy interaction in the EMU: A dynamic game approach," Open Access publications from Tilburg University urn:nbn:nl:ui:12-91686, Tilburg University.
  5. Carraro, Carlo & Siniscalco, Domenico, 1998. "International Institutions and Environmental Policy: International environmental agreements: Incentives and political economy1," European Economic Review, Elsevier, Elsevier, vol. 42(3-5), pages 561-572, May.
  6. Mariotti, Marco, 1997. "A Model of Agreements in Strategic Form Games," Journal of Economic Theory, Elsevier, Elsevier, vol. 74(1), pages 196-217, May.
  7. Ecchia, Giulio & Mariotti, Marco, 1998. "Coalition formation in international environmental agreements and the role of institutions," European Economic Review, Elsevier, Elsevier, vol. 42(3-5), pages 573-582, May.
  8. Bas van Aarle & Giovanni Di Bartolomeo & Jacob Engwerda & Joseph Plasmans, 2002. "Staying Together or Breaking Apart: Policy-makers’ Endogenous Coalitions Formation in the European Economic and Monetary Union," CESifo Working Paper Series 748, CESifo Group Munich.
  9. Gottfried Haber & Reinhard Neck & Warwick McKibbin, 2002. "Global Implications of Monetary and Fiscal Policy Rules in the EMU," Open Economies Review, Springer, Springer, vol. 13(4), pages 363-379, October.
  10. Smets, Frank, 2000. "What horizon for price stability," Working Paper Series, European Central Bank 0024, European Central Bank.
  11. Engwerda, J.C., 1997. "Computational aspects of the open-loop Nash Equilibrium in linear quadratic games," Discussion Paper, Tilburg University, Center for Economic Research 1997-83, Tilburg University, Center for Economic Research.
  12. Engwerda, J.C. & Aarle, B. van & Plasmans, J.E.J., 1998. "Fiscal Policy Interaction in the EMU," Discussion Paper, Tilburg University, Center for Economic Research 1998-113, Tilburg University, Center for Economic Research.
  13. Bloch, Francis, 1996. "Sequential Formation of Coalitions in Games with Externalities and Fixed Payoff Division," Games and Economic Behavior, Elsevier, Elsevier, vol. 14(1), pages 90-123, May.
  14. André Sapir & Marco Buti, 1998. "Economic policy in EMU," ULB Institutional Repository 2013/8078, ULB -- Universite Libre de Bruxelles.
  15. Chwe Michael Suk-Young, 1994. "Farsighted Coalitional Stability," Journal of Economic Theory, Elsevier, Elsevier, vol. 63(2), pages 299-325, August.
  16. Mojon, Benoît & Kashyap, Anil K. & Angeloni, Ignazio & Terlizzese, Daniele, 2002. "Monetary Transmission in the Euro Area : Where Do We Stand?," Working Paper Series, European Central Bank 0114, European Central Bank.
  17. John DiNardo & Mark P. Moore, 1999. "The Phillips Curve is Back? Using Panel Data to Analyze the Relationship Between Unemployment and Inflation in an Open Economy," NBER Working Papers 7328, National Bureau of Economic Research, Inc.
  18. Monfort, Alain & Renne, Jean-Paul & Rüffer, Rasmus & Vitale, Giovanni, 2003. "Is Economic Activity in the G7 Synchronized? Common Shocks versus Spillover Effects," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4119, C.E.P.R. Discussion Papers.
  19. Peter Hooper & Karen Johnson & Jaime Marquez, 1998. "Trade elasticities for G-7 countries," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 609, Board of Governors of the Federal Reserve System (U.S.).
  20. Hamid Faruqee & Douglas Laxton & Bart Turtelboom & Peter Isard & Eswar Prasad, 1998. "Multimod Mark III," IMF Occasional Papers 164, International Monetary Fund.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Jean-Sébastien Pentecôte & Maryline Huchet-Bourdon, 2009. "Shock asymmetries and distance to the Euro Area," Post-Print hal-00730072, HAL.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ant:wpaper:2003019. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joeri Nys).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.