Coordination and Stabilization Gains of Fiscal Policy in a Monetary Union
The issue of fiscal coordination in a Monetary Union is recurrent as monetary policy can no longer be used as a national stabilization policy instrument. We measure the increase in welfare due to the coordination of fiscal policies in the typical Neo-Keynesian environment, where monetary policy would have significantive and persistent real effects. We propose a decomposition of coordination gains into a deterministic and a stochastic parcel. We show that the deterministic fiscal coordination gain is high but that the stochastic gain, often called stabilization gain, is very small generating, for our calibration, an increase of 0.0161 percentage points, measured in consumption equivalents.
|Date of creation:||Mar 2009|
|Date of revision:||Mar 2009|
|Contact details of provider:|| Postal: Avenida da República no 79, 1050-243 Lisboa|
Phone: 21 799 81 50
Fax: 21 799 81 54
Web page: http://www.gee.gov.pt
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:mde:wpaper:0013. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ricardo Pinheiro Alves)
If references are entirely missing, you can add them using this form.