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In order to quantitatively assess the potential effects from the ongoing transformation of the fiscal framework of the European Union, we evaluate the economic and public finance stabilization properties of two benchmark fiscal rules using a New Keynesian small open economy model. If these...
Persistent link: https://www.econbiz.de/10015065544
How is the price level determined in a monetary union when the common monetary policy pegs the nominal interest rate? How are the price levels in the member countries determined? We extend the fiscal theory of the price level to the case of a heterogenous monetary union. Price level determinacy...
Persistent link: https://www.econbiz.de/10013553440
We analyze fiscal rules within a Monetary Union in the presence of (i) asymmetric information on member states' potential output and (ii) bail-out among member states. The first-best deficit is contingent on the cycle, that is, on member states' output gap. In the presence of asymmetric...
Persistent link: https://www.econbiz.de/10011705510
We analyze fiscal rules within a Monetary Union in the presence of (i) asymmetric information about member states' potential output and, therefore, output gap and (ii) bail-out among member states. In our framework, bail-out lowers the scope for signalling (discrimination) by member states...
Persistent link: https://www.econbiz.de/10011714310
In light of persistent in ation dispersion and rising debt levels in the EMU, this paper investigates the welfare implications of budget-neutral scal policies that counteract in ation di erentials. In a two-country DSGE model of a monetary union with traded and non-traded goods a national scal...
Persistent link: https://www.econbiz.de/10011437921
Persistent link: https://www.econbiz.de/10012991349
The paper studies the interaction between the monetary and fiscal authorities in the Euro area and the block of outside countries during the Third Stage of EMU. Restraints on fiscal policies and outside monetary policy are introduced as utility costs related to the use of the tax instruments...
Persistent link: https://www.econbiz.de/10011583909
target is defined as a ceiling, as in the Eurozone …
Persistent link: https://www.econbiz.de/10012966478
We examine, in a suitable theoretical framework, the relations between monetary and fiscal policies within the European Economic and Monetary Union (EMU). Our stylized setup of EMU includes the following political agents, each endowed with an objective function: (i) A central authority (EC),...
Persistent link: https://www.econbiz.de/10014123763
The presence of the lagged shadow policy rate in the interest rate feedback rule reduces the government spending multiplier nontrivially when the policy rate is constrained at the zero lower bound (ZLB). In the economy with policy inertia, increased inflation and output due to higher government...
Persistent link: https://www.econbiz.de/10013031117