This paper assesses how monetary authorities behave and how they interact. Pooled data for the 15 members of the European Union except Luxembourg and five other OECD countries serves to answer these questions. Three basic conclusions emerge. First, fiscal policy responds to the ratio of public...

Official adjustments of the budget balance to the cycle merely assume that the only category of government spending that responds automatically to the cycle is unemployment compensation. But estimates show otherwise. Payments for pensions, health, subsistence, invalidity, childcare and subsidies...

Do plans for a monetary union in Europe call for limits on the freedom of the member countries to use fiscal policy? To provide a tentative answer, we simulate the IMF model MULTIMOD, given various shocks, in the case of a European Monetary Union consisting only of France and Germany. The...

The macroeconomic literature on automatic stabilization tends to focus on taxes and dismiss the relevance of government expenditure, aside from unemployment compensation. Our results go sharply contrary to this view. We engage in an empirical analysis of 20 OECD countries from 1980-2001 and find...

What purpose does the European Monetary System serve? Who benefits from it? Is it a Deutschmark zone? Or could one argue that, despite the asymmetrical positions of France and Germany, the System does serve a certain collective interest? An attempt to answer these questions reveals a basic...