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Optimal Fiscal Policy Rules in a Monetary Union

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  • Kirsanova, Tatiana
  • Satchi, Mathan
  • Vines, David
  • Wren-Lewis, Simon

Abstract

This paper investigates the importance of fiscal policy in providing macroeconomic stabilisation in a monetary union. We use a microfounded New Keynesian model of a monetary union which incorporates persistence in inflation and non-Ricardian consumers, and derive optimal simple rules for fiscal authorities. We find that fiscal policy can play an important role in reacting to inflation and output, but that not much is lost if national fiscal policy is restricted to react only to national differences in inflation and output.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5533.

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Date of creation: Mar 2006
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Handle: RePEc:cpr:ceprdp:5533

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Keywords: monetary union; optimal monetary policy and fiscal policies; simple rules;

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References

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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
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    by Mainly Macro in Mainly Macro on 2012-01-29 21:26:00
  2. Why anti-stimulus arguments do not apply
    by Lars P Syll in Lars P Syll's Blog on 2012-01-30 09:36:54
  3. Some Thoughts on Fiscal Rules
    by Mainly Macro in Mainly Macro on 2012-12-09 23:41:00
  4. The UK is well ahead of the US and the EU in its use of fiscal rules
    by Managing Editor in British Politics and Policy at LSE on 2012-12-11 08:00:52
  5. The UK is well ahead of the US and the EU in its use of fiscal rules.
    by Blog Admin in EUROPP European Politics and Policy on 2012-12-15 11:00:38
  6. The Eurozone’s Founding Mistake
    by Mainly Macro in Mainly Macro on 2013-07-18 09:25:00
  7. How to be a New Keynesian and an Old Keynesian at the same time
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  8. [経済]ニューケインジアンとオールドケインジアンに同時になる方法
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  10. Euro Deja Vu?
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