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Macroeconomic Stabilization Policies in the EMU: Spillovers, Asymmetries, and Institutions

Author

Listed:
  • Giovanni Di Bartolomeo
  • Jacob Engwerda
  • Joseph Plasmans
  • Bas van Aarle
  • Tomasz Michalak

Abstract

This paper studies the institutional design of the coordination of macroeconomic stabilization policies within a monetary union in the framework of linear quadratic differential games. A central role in the analysis plays the partitioned game approach of the endogenous coalition formation literature. The specific policy recommendations in the EMU context depend on the particular characteristics of the shocks and the economic structure. In the case of a common shock, fiscal coordination or full policy coordination is desirable. When asymmetric shocks are considered, fiscal coordination improves the performance but full policy coordination doesn’t produce further gains in policymakers’ welfare.

Suggested Citation

  • Giovanni Di Bartolomeo & Jacob Engwerda & Joseph Plasmans & Bas van Aarle & Tomasz Michalak, 2005. "Macroeconomic Stabilization Policies in the EMU: Spillovers, Asymmetries, and Institutions," CESifo Working Paper Series 1376, CESifo.
  • Handle: RePEc:ces:ceswps:_1376
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    References listed on IDEAS

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    Keywords

    macroeconomic stabilization; EMU; coalition formation; linear quadratic differential games;
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