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Monetary Union: The Ins and Outs of Strategic Delegation

Author

Listed:
  • Paul Levine
  • Joseph Pearlmann

Abstract

This paper addresses the conduct of monetary and fiscal policy in a closed trading bloc consisting of ‘ins’ forming a monetary union and ‘outs’ who retain monetary sovereignty. All governments, however, can opt for a particular choice of institutional arrangement for their central bank and delegate monetary policy to central banks with varying degrees of independence or equivalently ‘conservatism’. This paper examines the outcome when these decisions are individually rational for governments and are taken strategically, taking into account the intra‐country interactions between fiscal authorities and their own central banks, and the inter‐country interactions between the same players.

Suggested Citation

  • Paul Levine & Joseph Pearlmann, 2001. "Monetary Union: The Ins and Outs of Strategic Delegation," Manchester School, University of Manchester, vol. 69(3), pages 285-309, June.
    • Handle: RePEc:bla:manchs:v:69:y:2001:i:3:p:285-309
    DOI: 10.1111/1467-9957.00249
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    Cited by:

    1. Francesca Castellani & Xavier Debrun, 2005. "Designing Macroeconomic Frameworks: A Positive Analysis of Monetary and Fiscal Delegation," International Finance, Wiley Blackwell, vol. 8(1), pages 87-117, March.
    2. Ms. Francesca Castellani & Mr. Xavier Debrun, 2001. "Central Bank Independence and the Design of Fiscal Institutions," IMF Working Papers 2001/205, International Monetary Fund.
    3. 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).
    4. Mr. Roel M. W. J. Beetsma & Mr. Xavier Debrun & Mr. Franc Klaassen, 2001. "Is Fiscal Policy Coordination in EMU Desirable?," IMF Working Papers 2001/178, International Monetary Fund.
    5. Francesca Castellani, 2001. "Central Bank Independence and Accountability Under Complete Information," IHEID Working Papers 05-2001, Economics Section, The Graduate Institute of International Studies.
    6. René Cabral-Torres, "undated". "Monetary and Fiscal Policy Coordination," Discussion Papers 05/28, Department of Economics, University of York.
    7. Marco Catenaro, 2000. "Macroeconomic Policy Interactions in the EMU: A Case for Fiscal Policy Co-ordination," School of Economics Discussion Papers 0003, School of Economics, University of Surrey.
    8. Xavier Debrun, 2000. "Fiscal Rules in a Monetary Union: A Short-Run Analysis," Open Economies Review, Springer, vol. 11(4), pages 323-358, October.

    More about this item

    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
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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