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Monetary and Fiscal Policy Interaction in the Euro Area with different assumptions on the Phillips curve

Listed author(s):
  • Bofinger, Peter
  • Mayer, Eric

In this paper we carry over a static version of a New Keynesian Macro Model to a monetary union. For a similar approach see Uhlig (2002). We will show in particular that a harmonious functioning of a monetary union critically depends on the correlation structure of shocks that hit the currency area. Additionally a high degree of integration in product markets is advantageous for the ECB as it prevents that national real interest rates can drive a wedge between macroeconomic outcomes across member states. In particular small countries are in a vulnerable and therefore in need for fiscal policy as an independent stabilization agent with room to breath.

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File URL: https://www.econstor.eu/bitstream/10419/22154/1/Bofinger_Mayer27.pdf
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Paper provided by University of Goettingen, Department of Economics in its series Center for European, Governance and Economic Development Research Discussion Papers with number 27.

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Date of creation: 2004
Handle: RePEc:zbw:cegedp:27
Contact details of provider: Postal:
Platz der Göttinger Sieben 3, 37073 Göttingen

Web page: http://www.cege.wiso.uni-goettingen.de/

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