The effects of fiscal policy coordination in a monetary union: implications for EMU

• Autores: María del Carmen Díaz Roldán
• Localización: VI Encuentro de Economía Pública. El gasto social y su financiación: Oviedo. 4-6- de febrero de 1999, 1999, pág. 14
• Idioma: inglés
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• Resumen

  • This paper discusses how the member countries of a monetary union react to country-specific shocks and to shocks from the rest of the world when the budget deficit is the only instrument used to face disturbances. We develop a three-country model in which countries show different preferences regarding objectives and face asymmetric disturbances. Two of the countries form a monetary union where an independent central bank controls monetary policy, and fiscal policy is determined by fiscal authorities at the national level. In this framework, we first study the transmission of macroeconomic shocks that affect both the monetary union and the rest of the world, and then we discuss the welfare aspects of the optimal solution and the extent to which a common fiscal policy may influence the performance and evolution of the monetary union.