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Fiscal policy coordination in the EMU: A problem with asymmetry and aggregation

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  • Matti Viren

Abstract

This paper deals with fiscal policy coordination within the European Monetary Union. In the first place, it investigates the potential problems which are caused by cross-country differences in key fiscal parameters and the asymmetric nature of these parameters. In the second section, the pros and cons of policy coordination evaluated using some multi-country estimates as point of reference. The empirical results clearly show that policy coordination within the EMU context is very difficult because of these country differences and asymmetries. Even so, it is shown that policy coordination pays off at least in cases where the countries share the same shocks. Some practical problems of policy coordination and future prospects are also considered in the paper.

Suggested Citation

  • Matti Viren, 2011. "Fiscal policy coordination in the EMU: A problem with asymmetry and aggregation," Discussion Papers 70, Aboa Centre for Economics.
  • Handle: RePEc:tkk:dpaper:dp70
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    File URL: http://www.ace-economics.fi/kuvat/dp70.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Fiscal policy; policy coordination; government deficit; EMU;
    All these keywords.

    JEL classification:

    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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