On the Desirability of Fiscal Constraints in a Monetary Union
AbstractThe desirability of fiscal constraints in monetary unions depends critically on whether the monetary authority can commit to follow its policies. If it can commit, then debt constraints can only impose costs. If it cannot commit, then fiscal policy has a free-rider problem, and debt constraints may be desirable. This type of free-rider problem is new and arises only because of a time inconsistency problem.
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Date of creation: Jan 2004
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- V.V. Chari & Patrick J. Kehoe, 2003. "On the desirability of fiscal constraints in a monetary union," Staff Report 330, Federal Reserve Bank of Minneapolis.
- F3 - International Economics - - International Finance
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
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- NEP-DGE-2004-01-25 (Dynamic General Equilibrium)
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