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Transatlantic Monetary and Fiscal Policy Interaction

  • Bas van Aarle
  • Harry Garretsen
  • Florence Huart

This paper studies the design, effects and interactions of monetary and fiscal policies in the euro-area and between the euro-area and the non euro-area. To do so, a stylized three-country model of monetary and fiscal policy rules is constructed. It is analyzed how monetary and fiscal rules affect the adjustment dynamics in the individual euro-area countries, the aggregate euro-area and the US, which is used as a proxy of the non euro-area. Four aspects play an important role in the analysis: (i) the consequences of alternative monetary and fiscal policy rules, (ii) transatlantic spillovers and policy interactions, and the dynamics of the euro and euro-area current account, (iii) the consequences of asymmetries between euroarea countries -asymmetries in macroeconomic shocks, macroeconomic structures or policy preferences-, and between the euro-area and the US, (iv) the role of alternative degrees of backward and forward looking (expectations) in output and inflation.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2003/wp-cesifo-2003-09/cesifo1_wp1042.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1042.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_1042
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