This paper addresses the conduct of monetary and fiscal policy in a closed trading bloc consisting of ‘ins’ forming a monetary union and ‘outs’ who retain monetary sovereignty. All governments can opt for a particular choice of institutional arrangement for their central bank (CB), however, and delegate monetary policy to it with varying degrees of independence or, equivalently, ‘conservatism’. This paper examines the outcome when these decisions are individually rational for governments and are taken strategically, taking in to account the intra-country interactions between fiscal authorities and their own central bank, and the inter-country interactions between the same players.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
1800.
Find related papers by JEL classification: E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
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