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Monetary and Fiscal Unification in the EU: A Stylized Analysis

Author

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  • Bas van Aarle
  • Florence Huart
  • Bas Van Aarle

Abstract

The Economic and Monetary Union (EMU) implies a considerable change in monetary and fiscal policy design in the European Union. With the aid of a two-country version of the Alesina and Tabellini (1987) model, this paper provides a stylized analysis of monetary and fiscal policy interaction in the EMU. It is shown how macroeconomic outcomes are affected by common monetary and fiscal policies and how outcomes depend on the commitment ability of the ECB when implementing its monetary policy. Moreover, it is analyzed how asymmetries between countries affect outcomes when entering EMU.

Suggested Citation

  • Bas van Aarle & Florence Huart & Bas Van Aarle, 1997. "Monetary and Fiscal Unification in the EU: A Stylized Analysis," CESifo Working Paper Series 149, CESifo.
    • Handle: RePEc:ces:ceswps:_149
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    Cited by:

    1. BARBIER-GAUCHARD Amélie, 2005. "Fiscal federalism, discipline and selection adverse in the EU : Lessons from a theoretical model," Economics Bulletin, AccessEcon, vol. 28(7), pages 1.
    2. Moïse Sidiropoulos & Eleftherios Spyromitros, 2006. "Fiscal Policy in a Monetary Union Under Alternative Labour-Market Structures," Working Papers of BETA 2006-25, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    3. Banerjee, Gaurango, 2001. "Rules and discretion with common central bank and separate fiscal authorities," Journal of Economics and Business, Elsevier, vol. 53(1), pages 45-68.
    4. Carmen Díaz-Roldán, "undated". "Coordination of Fiscal Policies in a Monetary Union," Working Papers on International Economics and Finance 00-09, FEDEA.
    5. Hans-Werner Sinn, 1999. "Inflation and Welfare: Comment on Robert Lucas," NBER Working Papers 6979, National Bureau of Economic Research, Inc.
    6. Luca Onorante, 2006. "Interaction of Fiscal Policies on the Euro Area: How Much Pressure on the ECB?," Economics Working Papers ECO2006/9, European University Institute.
    7. Moïse Sidiropoulos & Blandine Zimmer, 2009. "Monetary Union Enlargement, Fiscal Policy, and Strategic Wage Setting," Review of International Economics, Wiley Blackwell, vol. 17(3), pages 631-649, August.
    8. repec:ebl:ecbull:v:5:y:2005:i:11:p:1-8 is not listed on IDEAS
    9. Giancarlo Gandolfo, 2016. "International Monetary Integration: Optimum Currency Areas and Monetary Unions," Springer Texts in Business and Economics, in: International Finance and Open-Economy Macroeconomics, edition 2, chapter 20, pages 529-555, Springer.

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