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The Size of an Exchange Rate Union and the Need for Fiscal Policy Coordination / Die Größe einer Währungsunion und die Notwendigkeit zur fiskalpolitischen Harmonisierung

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  • De Bonis Valeria

    (Istituto di Economia e Finanza, Università di Roma “La Sapienza”, P.le A. Moro 5,1-00185 Rome, Italy)

Abstract

The negative transmission of fiscal policy among the members of an exchange rate union is a reason against the conduct of fiscal policy at the national level. Independent fiscal policies would act as asymmetric shocks for the union and cause a spiral of strategic reactions. This result must be qualified with respect to the economic dimension of the exchange rate union vis-à-vis the rest of the world. If the member countries are big, there exists a positive transmission of fiscal policy to the rest of the world in the case of flexible exchange rates and the external (positive) and internal (negative) spillover effects tend to offset each other.

Suggested Citation

  • De Bonis Valeria, 1996. "The Size of an Exchange Rate Union and the Need for Fiscal Policy Coordination / Die Größe einer Währungsunion und die Notwendigkeit zur fiskalpolitischen Harmonisierung," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 215(2), pages 188-200, April.
    • Handle: RePEc:jns:jbstat:v:215:y:1996:i:2:p:188-200
    DOI: 10.1515/jbnst-1996-0206
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