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Fiscal Aspects of Monetary Integration in Europe

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  • van der Ploeg, Frederick

Abstract

An adverse supply shock hits a two-country Mundell-Fleming world and causes unemployment and a higher cost of living. The optimal fiscal policies under noncooperative and under international policy coordination are then contrasted under three alternative regimes: floating exchange rates with hegemony (such as the EMS), and fixed exchange rates with symmetry (such as the EMU). The welfare loss depends on unemployment, real income and budgetary imbalance. There is also an examination of the effects of economic integration ("1992"), of indexation of wages to the cost of living, and of interactions between Europe and the US. The results shed some light on the recent proposals of the Delors Committee for economic and monetary union in Europe.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 340.

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Date of creation: Aug 1989
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Handle: RePEc:cpr:ceprdp:340

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Related research

Keywords: Exchange Rates; Fiscal Policy; Monetary Integration; Policy Coordination;

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References

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  1. Ploeg, F. van der, 1989. "Monetary interdependence under alternative exchange-rate regimes," Discussion Paper 1989-20, Tilburg University, Center for Economic Research.
  2. Canzoneri, M. & Rogers, C., 1989. "Is the European Community an Optimal Currency Area? : Optimal Tax Smoothing versus the Cost of Multiple Currencies," Discussion Paper 1989-23, Tilburg University, Center for Economic Research.
  3. Francesco Giavazzi & Alberto Giovannini, 1990. "Can the European Monetary System be Copied Outside Europe? Lessons from Ten Years of Monetary Policy Coordination in Europe," NBER Chapters, in: International Policy Coordination and Exchange Rate Fluctuations, pages 247-278 National Bureau of Economic Research, Inc.
  4. Keen, Michael, 1989. "Pareto-improving indirect tax harmonisation," European Economic Review, Elsevier, vol. 33(1), pages 1-12, January.
  5. van der Ploeg, Frederick, 1988. "International policy coordination in interdependent monetary economies," Journal of International Economics, Elsevier, vol. 25(1-2), pages 1-23, August.
  6. Kenen, Peter B, 1988. "Exchange Rates and Policy Coordination in an Asymmetric Model," CEPR Discussion Papers 240, C.E.P.R. Discussion Papers.
  7. Rogoff, Kenneth, 1985. "Can international monetary policy cooperation be counterproductive?," Journal of International Economics, Elsevier, vol. 18(3-4), pages 199-217, May.
  8. Gilles Oudiz & Jeffrey Sachs, 1984. "Macroeconomic Policy Coordination among the Industrial Economies," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 15(1), pages 1-76.
  9. Mckibbin, Warwick J. & Sachs, Jeffrey D., 1988. "Comparing the global performance of alternative exchange arrangements," Journal of International Money and Finance, Elsevier, vol. 7(4), pages 387-410.
  10. Canzoneri, Matthew B & Gray, Jo Anna, 1985. "Monetary Policy Games and the Consequences of Non-cooperative Behavior," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 547-64, October.
  11. Warwick J. McKibbin & Jeffrey Sachs, 1986. "Coordination of Monetary and Fiscal Policies in the OECD," NBER Working Papers 1800, National Bureau of Economic Research, Inc.
  12. J. Marcus Fleming, 1962. "Domestic Financial Policies under Fixed and under Floating Exchange Rates (Politiques finacièrieures intérieures avec un système de taux de change fixe et avec un système de taux de change," IMF Staff Papers, Palgrave Macmillan, vol. 9(3), pages 369-380, November.
  13. McKinnon, Ronald I, 1988. "Monetary and Exchange Rate Policies for International Financial Stability: A Proposal," Journal of Economic Perspectives, American Economic Association, vol. 2(1), pages 83-103, Winter.
  14. van der Ploeg, Frederick, 1987. "International Interdependence and Policy Coordination in Economies with Real and Nominal Wage Rigidity," CEPR Discussion Papers 217, C.E.P.R. Discussion Papers.
  15. Kenen, Peter B., 1987. "Global policy optimization and the exchange-rate regime," Journal of Policy Modeling, Elsevier, vol. 9(1), pages 19-63.
  16. Hamada, Koichi, 1976. "A Strategic Analysis of Monetary Interdependence," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 677-700, August.
  17. Patrick J. Kehoe, 1986. "Coordination of fiscal policies in a world economy," Staff Report 98, Federal Reserve Bank of Minneapolis.
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Citations

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Cited by:
  1. van der Ploeg, Frederick, 1991. "Budgetary Aspects of Economic and Monetary Integration in Europe," CEPR Discussion Papers 492, C.E.P.R. Discussion Papers.
  2. Ploeg, F. van der, 1990. "Macroeconomic policy coordination during the various phases of economic and monetary integration in Europe," Discussion Paper 1990-61, Tilburg University, Center for Economic Research.
  3. Frédéric Gavrel & Jean Bensaïd, 1993. "UEM et coordination des politiques budgétaires," Économie et Prévision, Programme National Persée, vol. 109(3), pages 47-56.

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