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Structural Reforms and Budget Deficits in a Monetary Union: A Strategic Approach

  • Campoy Juan Cristóbal


    (Universidad de Murcia)

  • Negrete Juan C.


    (Universidad de Murcia)

This paper explores the interrelations between budget deficits and structural reforms in a monetary union. The analysis considers the international spillovers generated by both policies. We show that efforts to achieve fiscal policy coordination within the Eurozone reduce member countries' incentives to carry out much-needed structural reforms. As a consequence, this cooperation can turn out to be welfare-reducing if it is not extended to the implementation of structural reforms.

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Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 10 (2010)
Issue (Month): 1 (July)
Pages: 1-31

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Handle: RePEc:bpj:bejeap:v:10:y:2010:i:1:n:59
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