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Fiscal Aspects of Monetary Integration in Europe

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  • van der Ploeg, Frederick

Abstract

An adverse supply shock hits a two-country Mundell-Fleming world and causes unemployment and a higher cost of living. The optimal fiscal policies under noncooperative and under international policy coordination are then contrasted under three alternative regimes: floating exchange rates with hegemony (such as the EMS), and fixed exchange rates with symmetry (such as the EMU). The welfare loss depends on unemployment, real income and budgetary imbalance. There is also an examination of the effects of economic integration ("1992"), of indexation of wages to the cost of living, and of interactions between Europe and the US. The results shed some light on the recent proposals of the Delors Committee for economic and monetary union in Europe.

Suggested Citation

  • van der Ploeg, Frederick, 1989. "Fiscal Aspects of Monetary Integration in Europe," CEPR Discussion Papers 340, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:340
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    Cited by:

    1. Jean Bensaïd & Frédéric Gavrel, 1993. "UEM et coordination des politiques budgétaires," Économie et Prévision, Programme National Persée, vol. 109(3), pages 47-56.
    2. Scheide, Joachim & Trapp, Peter, 1991. "Erfordert eine europäische Währungsunion die Harmonisierung der Finanzpolitik?," Open Access Publications from Kiel Institute for the World Economy 2006, Kiel Institute for the World Economy (IfW Kiel).
    3. Barry Eichengreen., 1992. "The Political Economy of Fiscal Policy After EMU," Center for International and Development Economics Research (CIDER) Working Papers C92-004, University of California at Berkeley.
    4. de Groof, R.J. & van Tuijl, M.A., 1992. "Commercial integration and fiscal policy in interdependent, financially integrated two-sector economies with real and nominal wage rigidity," Other publications TiSEM 892948a8-83fa-42c0-96bf-b, Tilburg University, School of Economics and Management.
    5. de Groof, R.J. & van Tuijl, M.A., 1992. "Commercial integration and fiscal policy in interdependent, financially integrated two-sector economies with real and nominal wage rigidity," Research Memorandum FEW 567, Tilburg University, School of Economics and Management.

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