Given a monetary Union which is heterogeneous at the level of labour market flexibility, this paper investigates the effects in terms of macroeconomic stabilization of the different degrees of fiscal coordination between governments. We use a static Keynesian model within a closed monetary Union and we introduce an intermediate level of coordination between the national governments, which is the variable geometry coordination between economic clubs consisting of structurally close countries. The distinction between the wide Unions welfare and each country members individual welfare proves that the effectiveness of a variable geometry fiscal coordination mainly depends on the type of the economic shocks affecting the Union members, the nature of the fiscal spillovers, and the extent of the Unions structural heterogeneity. While this type of game is effective in neutralizing the demand shocks, it doesnt manage to improve the national protection of all the country members against the supply shocks.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Faculty of economics, Department of Economics in its series Working Papers with number
200834.
Length: 27 pages Date of creation: Mar 2008 Date of revision:
Sep 2008 Publication status: Published in Panoeconomicus, September 2008, pages 325-352 Handle: RePEc:voj:wpaper:200834
Find related papers by JEL classification: E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization
This paper has been announced in the following NEP Reports: