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Monetary Union: The Ins and Outs of Strategic Delegation


  • Levine, Paul L
  • Pearlman, Joseph


This paper addresses the conduct of monetary and fiscal policy in a closed trading bloc consisting of ‘ins’ forming a monetary union and ‘outs’ who retain monetary sovereignty. All governments can opt for a particular choice of institutional arrangement for their central bank (CB), however, and delegate monetary policy to it with varying degrees of independence or, equivalently, ‘conservatism’. This paper examines the outcome when these decisions are individually rational for governments and are taken strategically, taking in to account the intra-country interactions between fiscal authorities and their own central bank, and the inter-country interactions between the same players.

Suggested Citation

  • Levine, Paul L & Pearlman, Joseph, 1998. "Monetary Union: The Ins and Outs of Strategic Delegation," CEPR Discussion Papers 1800, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1800

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    References listed on IDEAS

    1. Woodford, Michael, 1995. "Price-level determinacy without control of a monetary aggregate," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 43(1), pages 1-46, December.
    2. Michael Woodford, 1996. "Control of the Public Debt: A Requirement for Price Stability?," NBER Working Papers 5684, National Bureau of Economic Research, Inc.
    3. McCallum, Bennett T., 1986. "Some issues concerning interest rate pegging, price level determinacy, and the real bills doctrine," Journal of Monetary Economics, Elsevier, vol. 17(1), pages 135-160, January.
    4. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1, January.
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    Cited by:

    1. Fritz Breuss & Andrea Weber, 1999. "Economic Policy Coordination in the EMU: Implications for the Stability Pact," EUI-RSCAS Working Papers 26, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
    2. Roel M. W. J. Beetsma & Xavier Debrun & Franc Klaassen, 2001. "Is Fiscal Policy Coordination in EMU Desirable?," IMF Working Papers 01/178, International Monetary Fund.
    3. Francesca Castellani, 2001. "Central Bank Independence and Accountability Under Complete Information," IHEID Working Papers 05-2001, Economics Section, The Graduate Institute of International Studies.
    4. René Cabral-Torres, "undated". "Monetary and Fiscal Policy Coordination," Discussion Papers 05/28, Department of Economics, University of York.
    5. Francesca Castellani & Xavier Debrun, 2001. "Central Bank Independence and the Design of Fiscal Institutions," IMF Working Papers 01/205, International Monetary Fund.
    6. Marco Catenaro, 2000. "Macroeconomic Policy Interactions in the EMU: A Case for Fiscal Policy Co-ordination," School of Economics Discussion Papers 0003, School of Economics, University of Surrey.
    7. Xavier Debrun, 2000. "Fiscal Rules in a Monetary Union: A Short-Run Analysis," Open Economies Review, Springer, vol. 11(4), pages 323-358, October.

    More about this item


    Central Bank Independence; Delegation Game; Monetary Union;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions


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