Macroeconomic stabilization through monetary and fiscal policy coordination: Implications for European Monetary Union
In a two-country model, we consider the implications of monetary and fiscal policy coordination for macroeconomic stabilization. We show that the optimal regime is one of monetary and fiscal policy coordination under flexible exchange rates. In the context of the European Community, this suggests that the desire to fix exchange rates may not be costless. In addition, we show that fiscal coordination requires a relatively high degree of flexibility in fiscal policy. This result suggests that limits on the flexibility of fiscal policies, as suggested in the Delors Report, may hinder macroeconomic stabilization. Copyright Kluwer Academic Publishers 1994
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cohen, Daniel & Wyplosz, Charles, 1989. "The European Monetary Union: An Agnostic Evaluation," CEPR Discussion Papers 306, C.E.P.R. Discussion Papers.
- Bayoumi, Tamim & Eichengreen, Barry, 1992.
"Shocking Aspects of European Monetary Unification,"
CEPR Discussion Papers
643, C.E.P.R. Discussion Papers.
- Tamim Bayoumi and Barry Eichengreen., 1992. "Shocking Aspects of European Monetary Unification," Economics Working Papers 92-187, University of California at Berkeley.
- Tamim Bayoumi & Barry Eichengreen, 1992. "Shocking Aspects of European Monetary Unification," NBER Working Papers 3949, National Bureau of Economic Research, Inc.
- Currie, David & Levine, Paul L & Pearlman, Joseph, 1990.
"European Monetary Union or Hard EMS?,"
CEPR Discussion Papers
472, C.E.P.R. Discussion Papers.
- Canzoneri, Matthew B. & Henderson, Dale W., 1988. "Is sovereign policymaking bad?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 28(1), pages 93-140, January.
- Bayoumi, Tamim & Eichengreen, Barry, 1992. "Shocking Aspects of Monetary Unification," Department of Economics, Working Paper Series qt791143kp, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Canzoneri, Matthew B & Gray, Jo Anna, 1985. "Monetary Policy Games and the Consequences of Non-cooperative Behavior," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 547-64, October.
- Matthew B. Canzoneri & Dale W. Henderson, 1991. "Monetary Policy in Interdependent Economies: A Game-Theoretic Approach," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262031787, June.
- Alesina, Alberto & Tabellini, Guido, 1987. "Rules and Discretion with Noncoordinated Monetary and Fiscal Policies," Economic Inquiry, Western Economic Association International, vol. 25(4), pages 619-30, October.
- Laskar, Daniel, 1993. "The role of a fixed exchange rate system when central bankers are independent," Journal of International Money and Finance, Elsevier, vol. 12(3), pages 319-331, June.
- Patrick J. Kehoe, 1986.
"Coordination of fiscal policies in a world economy,"
98, Federal Reserve Bank of Minneapolis.
- Kehoe, Patrick J., 1987. "Coordination of fiscal policies in a world economy," Journal of Monetary Economics, Elsevier, vol. 19(3), pages 349-376, May.
- Turnovsky, Stephen J., 1988.
"The gains from fiscal cooperation in the two-commodity real trade model,"
Journal of International Economics,
Elsevier, vol. 25(1-2), pages 111-127, August.
- Stephen J. Turnovsky, 1987. "The Gains from Fiscal Cooperation in the Two Commodity Real Trade Model," NBER Working Papers 2466, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:kap:openec:v:5:y:1994:i:4:p:307-326. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.