This paper considers the implications of international policy coordination when both monetary and fiscal policy choices are endogenous. We show that a movement from insular monetary commitment to international monetary policy coordination will, if fiscal policies are not coordinated, produce...

We consider a standard two-country monetary policy game with fixed nominal wage contracts. The policy regime is either non-cooperative or cooperative. We extend conventional analyses by deriving the natural rate of employment endogenously through monopoly union decision-making. As unions attempt...

We demonstrate that in important cases Propositions 3 and 4 in Eijffinger, Hoeberichts, and Schaling (2000) may fail. Moreover, their monetary policy delegation arrangement, which advocates that central banker preference uncertainty may be desirable, is dominated by other arrangements without...

We show that accommodation policies may render efficient bargaining in the labour market unsustainable as a perfect Nash equilibrium of the infinitely repeated game. In fact, in the eyes of the labour market participants, efficient bargaining may be Pareto-dominated by the monopoly-union...

So far, the 'New Open Economy Macroeconomics' literature has primarily focused on monetary policy and monetary policy rules, rather than paying attention also to fiscal policy. This is an omission because, especially with the advent of EMU, the burden on fiscal policy as an instrument for...

According to most academics and policymakers, transparency in monetary policymaking is desirable. I examine this proposition in a small theoretical model emphasizing forward-looking private sector behaviour. Transparency makes it easier for price setters to infer the central bank's future policy...

We consider the political economy of a monetary union wheremember governments attempt to influence the policy of the commoncentral bank. Modeling this as a common agency with incentivecontracts, we show that if incentives are all that matters for the bank,the equilibrium implements a weighted...