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Delegation and Fiscal Policy in the Open Economy: More Bad News for Rogoff's Delegation Game

  • Paul Levine
  • Joseph Pearlman


This article studies the open-economy Rogoff delegation game, taking into account both intra-country and intercountry interactions between fiscal authorities and central banks. With representative bankers, the Nash equilibrium of fiscal and monetary authorities independently responding to supply-side shocks sees insufficient monetary adjustment and an imbalance towards fiscal stabilization if shocks are sufficiently symmetric; the opposite occurs if shocks are sufficiently asymmetric. Appointing conservative bankers shifts the fiscal–monetary balance away from monetary towards fiscal policy. Unilateral delegation benefits that country; but when all countries independently delegate, the outcome is only favorable if shocks are sufficiently asymmetric. Copyright Kluwer Academic Publishers 2002

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Article provided by Springer in its journal Open Economies Review.

Volume (Year): 13 (2002)
Issue (Month): 2 (April)
Pages: 153-174

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Handle: RePEc:kap:openec:v:13:y:2002:i:2:p:153-174
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