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Coordination of fiscal policies in a monetary union

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Author Info
Carmen Díaz Roldán (Departamento de Economía-UPNA)

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Abstract

This paper examines how the member countries of a monetary union react to country-specific shocks and to shocks from the rest of the world, when te budget deficit is the only policy instrument available. We develop a three-country model in which countries show different preferences regarding objectives, and face asymmetric disturbances. Two of the countries form a monetary union where an independent central bank controls monetary policy, and fiscal policy is determined by fiscal authorities at the national level. In this framework, we analyse in strategic terms how authorities can deal with monetary, real and supply shocks using fiscal policy with stabilizing purposes. Finally, we discuss the welfare aspects of the optimal solution and the extent to which a coordinated fiscal policy may influence the performance and evlution of the monetary union. Classification-JEL: E61, E62, F42

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Publisher Info
Paper provided by Departamento de Economía - Universidad Pública de Navarra in its series Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra with number 0003.

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Length: 49 pages
Date of creation: 2000
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Publication status: Published in
Handle: RePEc:nav:ecupna:0003

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Related research
Keywords: Monetary union; fiscal policy; policy coordination;

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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.:
  1. Carmen Díaz Roldán, 2000. "International monetary policy coordination under asymmetric shocks," Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra 0002, Departamento de Economía - Universidad Pública de Navarra. [Downloadable!]
  2. Turnovsky, Stephen J., 1988. "The gains from fiscal cooperation in the two-commodity real trade model," Journal of International Economics, Elsevier, vol. 25(1-2), pages 111-127, August. [Downloadable!] (restricted)
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  3. Carmen Díaz Roldán, 2000. "Coordination of fiscal policies in a monetary union," Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra 0003, Departamento de Economía - Universidad Pública de Navarra. [Downloadable!]
    Other versions:
  4. van Aarle, Bas & Huart, Florence, 1999. "Monetary and fiscal unification in the EU: a stylized analysis," Journal of Economics and Business, Elsevier, vol. 51(1), pages 49-66, January. [Downloadable!] (restricted)
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  5. Kehoe, Patrick J., 1987. "Coordination of fiscal policies in a world economy," Journal of Monetary Economics, Elsevier, vol. 19(3), pages 349-376, May. [Downloadable!] (restricted)
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  6. Dixon, Huw David & Santoni, Michele, 1997. "Fiscal Policy Coordination with Demand Spillovers and Unionised Labour Markets," Economic Journal, Royal Economic Society, vol. 107(441), pages 403-17, March. [Downloadable!] (restricted)
  7. Barry Eichengreen & Charles Wyplosz, 1998. "The Stability Pact: more than a minor nuisance?," Economic Policy, CEPR, CES, MSH, vol. 13(26), pages 65-113, 04. [Downloadable!] (restricted)
  8. Joseph Daniels & David VanHoose, 1998. "Two-Country Models of Monetary and Fiscal Policy: What Have We Learned? What More Can We Learn?," Open Economies Review, Springer, vol. 9(3), pages 265-284, July. [Downloadable!] (restricted)
  9. Driver, Rebecca L & Wren-Lewis, Simon, 1999. "European Monetary Union and Asymmetric Shocks in a New Keynesian Model," Oxford Economic Papers, Oxford University Press, vol. 51(4), pages 665-88, October.
  10. Maurice Obstfeld & Giovanni Peri, 1998. "Regional non-adjustment and fiscal policy," Economic Policy, CEPR, CES, MSH, vol. 13(26), pages 205-259, 04. [Downloadable!] (restricted)
  11. Tabellini, Guido, 1990. "Domestic politics and the international coordination of fiscal policies," Journal of International Economics, Elsevier, vol. 28(3-4), pages 245-265, May. [Downloadable!] (restricted)
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  12. Buiter, W.H. & Corsetti, G. & Roubini, N., 1992. "Excessive Deficits: Sense and Nonsence in the Treaty of Maastricht," Papers 674, Yale - Economic Growth Center.
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  13. Nickell, Stephen J, 1990. "Unemployment: A Survey," Economic Journal, Royal Economic Society, vol. 100(401), pages 391-439, June. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Mª Carmen Díaz Roldán, 2002. "On the Desirability of Supply-Side Intervention in a Monetary Union," Economic Working Papers at Centro de Estudios Andaluces E2002/21, Centro de Estudios Andaluces. [Downloadable!]
  2. Carmen Díaz-Roldán, . "Coordination of Fiscal Policies in a Monetary Union," Working Papers on International Economics and Finance 00-09, FEDEA. [Downloadable!]
    Other versions:
  3. Carmen Díaz - Roldan, 2003. "Supply-policy coordination in a monetary union," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 18(2), pages 163-179. [Downloadable!]
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