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Efficiency of stability-oriented institutions: the European case

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Stability-oriented European institutions correspond to the general prescriptions of the ‘new macroeconomics consensus’. This contribution provides an assessment of the pros and cons of these institutions in terms of macro stabilisation and exchange-rate swings drawing on different scenarios. We argue that the institutions which have been associated with the Euro – limits on public deficits and a conservative central bank – have somewhat jeopardized the efficiency of this new exchange-rate regime. Adaptation of institutions is thus needed: either cooperation or coordination may enhance European welfare.

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Paper provided by Observatoire Francais des Conjonctures Economiques (OFCE) in its series Documents de Travail de l'OFCE with number 2007-06.

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Date of creation: 2007
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Handle: RePEc:fce:doctra:0706

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Keywords: monetary policy; fiscal policy; central bank; stability pact; time-consistency; exchange rate; cooperation; coordination;

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Cited by:
  1. Edwin Le Heron, 2009. "Fiscal and Monetary Policies in a Keynesian Stock-Flow Consistent Model," GEMF Working Papers 2009-01, GEMF - Faculdade de Economia, Universidade de Coimbra.

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