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The fiscal dimension of a common monetary policy: results with a non-Ricardian global model


  • Silvia Sgherri


The paper studies the interaction of fiscal and monetary policy within an Economic and Monetary Union (EMU). Results suggest that, in a model in which bonds and money are counted as net wealth, an important source of cross-country heterogeneity in response to a common monetary shock is the differences in national economies' budgetary positions. In particular, we note that centralising seigniorage revenues may lead, in the long term, to wealth redistribution across countries. Although institutional arrangements such as the Stability Pact might not be necessary to ensure fiscal sustainability, its strict enforcement is shown to be associated with overall ever-lasting benefits. Transition to the new steady state is, however, likely to be remarkably costly for high-debt EMU countries. Finally, different degrees of efficiency characterising European credit markets do not seem to play a major role in explaining asymmetric responses.

Suggested Citation

  • Silvia Sgherri, 2002. "The fiscal dimension of a common monetary policy: results with a non-Ricardian global model," The European Journal of Finance, Taylor & Francis Journals, vol. 8(4), pages 449-479.
  • Handle: RePEc:taf:eurjfi:v:8:y:2002:i:4:p:449-479 DOI: 10.1080/1351847021000025759

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    References listed on IDEAS

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    Cited by:

    1. S. Sgherri, 2000. "When is labour market flexibility welcome? More on asymmetric policy impacts in Europe," WO Research Memoranda (discontinued) 619, Netherlands Central Bank, Research Department.

    More about this item


    Economic And Monetary Union; Asymmetric Monetary Transmissions; Stability; And Growth Pact; Ricardian Non-NEUTRALITIES; Multimod Mark Iii;

    JEL classification:

    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission


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