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Macroeconomic policy interaction under EMU: A dynamic game approach

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  • Aarle, B. van

    (Tilburg University)

  • Engwerda, J.C.

    (Tilburg University)

  • Plasmans, J.E.J.

    (Tilburg University)

  • Weeren, A.J.T.M.

    (Tilburg University)

Abstract

In this article, we study macroeconomic stabilization in the Economic and Monetary Union (EMU) using a dynamic game approach. With the aid of a stylized macroeconomic model, this article analyzes the transmission and interaction of national fiscal policies and monetary policy of the European Central Bank (ECB) in the EMU. A special focus is on the effects of labor market institutions in the participating countries and of the introduction of fiscal stringency criteria like those imposed in the Stability and Growth Pact. Copyright Kluwer Academic Publishers 2001

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Paper provided by Tilburg University in its series Open Access publications from Tilburg University with number urn:nbn:nl:ui:12-85061.

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Date of creation: 2001
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Publication status: Published in Open Economies Review (2001) v.12, p.29-60
Handle: RePEc:ner:tilbur:urn:nbn:nl:ui:12-85061

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Web page: http://www.tilburguniversity.edu/

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References

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  1. Jensen, Svend Erik Hougaard & Jensen, Lars Grue, 1995. "Debt, deficits and transition to EMU: A small country analysis," European Journal of Political Economy, Elsevier, vol. 11(1), pages 3-25, March.
  2. Demertzis, Maria & Hughes Hallett, Andrew, 1999. "An Independent Central Bank Faced With Elected Governments," CEPR Discussion Papers 2219, C.E.P.R. Discussion Papers.
  3. Engwerda, J.C. & Aarle, B. van & Plasmans, J.E.J., 1998. "Fiscal Policy Interaction in the EMU," Discussion Paper 1998-113, Tilburg University, Center for Economic Research.
  4. German, Israel, 1985. "Disequilibrium Dynamics and the Stability of Quasi Equilibria," The Quarterly Journal of Economics, MIT Press, vol. 100(3), pages 571-96, August.
  5. Weeren, A.J.T.M. & Schumacher, J.M. & Engwerda, J.C., 1994. "Asymptotic analysis of Nash equilibria in nonzero-sum linear-quadratic differential games: The two player case," Research Memorandum 634, Tilburg University, Faculty of Economics and Business Administration.
  6. Reinhard Neck & Engelbert Dockner, 1995. "Commitment and coordination in a dynamic game model of international economic policy-making," Open Economies Review, Springer, vol. 6(1), pages 5-28, January.
  7. Hughes Hallett, A J & Ma, Yue, 1996. "Changing Partners: The Importance of Coordinating Fiscal and Monetary Policies within a Monetary Union," The Manchester School of Economic & Social Studies, University of Manchester, vol. 64(2), pages 115-34, June.
  8. Agell, Jonas, 1998. "On the Benefits from Rigid Labour Markets: Norms, Market Failures, and Social Insurance," Working Paper Series 1998:17, Uppsala University, Department of Economics.
  9. Andrew Hughes Hallett & Laura Piscitelli, 1999. "EMU in Reality: The Effect of a Common Monetary Policy on Economies with Different Transmission Mechanisms," Empirica, Springer, vol. 26(4), pages 337-358, December.
  10. Engwerda, J.C. & Salmah, Y., 2010. "Feedback Nash Equilibria for Linear Quadratic Descriptor Differential Games," Discussion Paper 2010-79, Tilburg University, Center for Economic Research.
  11. Engwerda, J.C., 2000. "Feedback Nash equilibria in the scalar infinite horizon LQ-Game," Open Access publications from Tilburg University urn:nbn:nl:ui:12-81029, Tilburg University.
  12. Berthold, Norbert & Fehn, Rainer, 1998. "Does EMU Promote Labor-Market Reforms?," Kyklos, Wiley Blackwell, vol. 51(4), pages 509-36.
  13. Barrell, Ray & Sefton, James, 1997. "Fiscal Policy and the Masstricht Solvency Criteria," The Manchester School of Economic & Social Studies, University of Manchester, vol. 65(3), pages 259-79, June.
  14. Jürgen Hagen & Stefan Lutz, 1996. "Fiscal and monetary policy on the way to EMU," Open Economies Review, Springer, vol. 7(4), pages 299-325, October.
  15. Marco BUTI & Daniele FRANCO & Hedwig ONGENA, 1997. "Budgeetary Policies during Recessions : Retrospective Application of the Stability and Growth Pact” to the Post-War Period," Discussion Papers (REL - Recherches Economiques de Louvain) 1997041, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  16. Petit, Maria Luisa, 1989. "Fiscal and Monetary Policy Co-ordination: A Differential Game Approac h," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(2), pages 161-79, April-Jun.
  17. Lensberg, Terje, 1988. "Stability and the Nash solution," Journal of Economic Theory, Elsevier, vol. 45(2), pages 330-341, August.
  18. Currie, David & Levine, Paul L & Pearlman, Joseph, 1990. "European Monetary Union or Hard EMS?," CEPR Discussion Papers 472, C.E.P.R. Discussion Papers.
  19. Fershtman, Chaim & Kamien, Morton I, 1987. "Dynamic Duopolistic Competition with Sticky Prices," Econometrica, Econometric Society, vol. 55(5), pages 1151-64, September.
  20. Hughes Hallett, A J & Vines, D, 1993. "On the Possible Costs of European Monetary Union," The Manchester School of Economic & Social Studies, University of Manchester, vol. 61(1), pages 35-64, March.
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Citations

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Cited by:
  1. Bas van Aarle & Jacob Engwerda & Joseph Plasmans, 2001. "Monetary and Fiscal Policy Interaction in the EMU: A Dynamic Game Approach," CESifo Working Paper Series 437, CESifo Group Munich.
  2. Creel, Jérôme & Sterdyniak, Henri, 2002. "The fiscal theory of the price level and sluggish inflation : how important shall the wealth effect be ?," Economics Papers from University Paris Dauphine 123456789/3304, Paris Dauphine University.
  3. Creel, Jerome & Capoen, Fabrice & Cussy, Pascal & Lenoble-Liaud, Helene, 2003. "How to manage financial shocks: Intra-European vs. international monetary coordination," Journal of Macroeconomics, Elsevier, vol. 25(4), pages 431-455, December.
  4. Herzog, Bodo, 2006. "Coordination of fiscal and monetary policy in CIS-countries: A theory of optimum fiscal area?," Research in International Business and Finance, Elsevier, vol. 20(2), pages 256-274, June.
  5. Plasmans, J.E.J., 2001. "The Effects of Fiscal and Monetary Policy in an Open Economy: A Case of EU, the USA and Japan," Open Access publications from Tilburg University urn:nbn:nl:ui:12-92275, Tilburg University.
  6. Bas van Aarle & Giovanni Di Bartolomeo & Jacob Engwerda & Joseph Plasmans, 2002. "Monetary and Fiscal Policy Design in the EMU: An Overview," Open Economies Review, Springer, vol. 13(4), pages 321-340, October.
  7. repec:spo:wpecon:info:hdl:2441/2972 is not listed on IDEAS
  8. Van Aarle B. & Engwerda J. & Plasmans J., 2001. "Monetary and fiscal policy interaction in the EMU: a dynamic game approach," Working Papers 2001005, University of Antwerp, Faculty of Applied Economics.
  9. F. Bohn, 2003. "Monetary Union and the Interest-Exchange Rate Trade-off," Economics Discussion Papers 554, University of Essex, Department of Economics.
  10. Plasmans, J.E.J. & Meersman, H. & Poeck, A. van & Merlevede, B., 1999. "Generosity of the Unemployment Benefit System and Wage Flexibility in EMU: Time-Varying Evidence in Five Countries," Open Access publications from Tilburg University urn:nbn:nl:ui:12-81573, Tilburg University.
  11. Oliver Grimm & Stefan Ried, 2007. "Macroeconomic Policy in a Heterogeneous Monetary Union," SFB 649 Discussion Papers SFB649DP2007-028, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  12. Aarle, B. van & Bartolomeo, G. di & Engwerda, J.C. & Plasmans, J.E.J., 2001. "Monetary and fiscal policy design in the EMU using a dynamic game approach: An overview," Open Access publications from Tilburg University 2001.19, Tilburg University.
  13. Fritz Breuss & Andrea Weber, 1999. "Economic Policy Coordination in the EMU: Implications for the Stability Pact," EUI-RSCAS Working Papers 26, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).

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