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Fiscal Policy in a Monetary Union: Can Fiscal Cooperation be Counterproductive?

Lambertini, L, Levine, P and Pearlman, J Fiscal Policy in a Monetary Union: Can Fiscal Cooperation be Counterproductive? .

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Abstract

We analyze the interaction of monetary and fiscal policies in a monetary union where the common central bank is more conservative than the fiscal authorities. When monetary and fiscal policies are discretionary, we find that the Nash equilibrium is sub-optimal with higher output and lower inflation than the cooperative Ramsey op- timum. In a further example of counterproductive cooperative, we find that fiscal cooperation makes matters worse. We also examine cooperative and non-cooperative fiscal policy in the case where the central bank can commit and has the same prefer- ences as the fiscal authorities.

Item Type: Other
Authors :
NameEmailORCID
Lambertini, LUNSPECIFIEDUNSPECIFIED
Levine, Pp.levine@surrey.ac.ukUNSPECIFIED
Pearlman, JUNSPECIFIEDUNSPECIFIED
Uncontrolled Keywords : F33, F42, fiscal-monetary policy interactions, fiscal cooperation and non-cooperation.
Depositing User : Symplectic Elements
Date Deposited : 16 May 2017 15:14
Last Modified : 17 May 2017 14:33
URI: http://epubs.surrey.ac.uk/id/eprint/818193

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