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In this paper, I argue that international policy coordination requires to include both monetary as well as fiscal policy because both sides include policy instruments that allow the strategic manipulation of the country's terms of trade. Hence, the coordination of one part of national...
Persistent link: https://www.econbiz.de/10003576414
The paper analyzes the usefulness of budgetary cooperation in a monetary union, even if it is limited to a subgroup of countries with close structural characteristics. The author finds that its advantages depend on the nature of the shocks and on the width of the heterogeneities within the...
Persistent link: https://www.econbiz.de/10009575100
Fiscal policy is widely criticized for its failure to act as a stabilizing countercyclical force in the European Monetary Union. Two periods should be distinguished: Prior to the Financial Crisis of 2008, when monetary policy had traction to pursue stability for the aggregate eurozone, fiscal...
Persistent link: https://www.econbiz.de/10010401689
The need for macroprudential policy to “lean against the wind” of credit cycles at the aim of financial and hence macroeconomic stability is a common belief. Which design of macroprudential policy might attain the greatest stability for the economy is still an open debate. This paper builds...
Persistent link: https://www.econbiz.de/10012841094
We use a version of the New Area-Wide Model (NAWM) developed at the ECB in order to quantify the gains from monetary policy cooperation. The model is calibrated in order to match a set of empirical moments. We then derive the cooperative and (open-loop) Nash monetary policies, assuming that the...
Persistent link: https://www.econbiz.de/10013316628
This paper analyzes the strategic interaction between the monetary policies of two countries, in an intertemporal general equilibrium model with nominal rigidities and imperfect competition. It offers an excursus on non-cooperative towards cooperative solutions. All the results can be read by...
Persistent link: https://www.econbiz.de/10014224287
This paper analyses the implications of real wage rigidities in a stochastic two-country general equilibrium model. It is shown how real wage rigidities in one country affect welfare in both countries. Assuming that the choice of whether or not to adopt flexible wages is in the hands of labour...
Persistent link: https://www.econbiz.de/10014076028
The economic rationale for international monetary policy coordination is not strong. This is the conclusion, not only of the traditional Mundell-Fleming literature, but also the more recent New Open-Economy Macroeconomics literature on international monetary coordination. Yet a broader political...
Persistent link: https://www.econbiz.de/10013086263
This paper examines the policy challenges a country faces when it wants to both reduce inflation and maintain a sustainable external position. Mundell's (1962) policy assignment framework suggests that these two goals may be mutually incompatible unless monetary and fiscal policies are properly...
Persistent link: https://www.econbiz.de/10012955173
Should monetary policy rule stabilize the exchange rate? In contrast to the conclusion from the optimal open-economy monetary policy literature, this papers show analytically, in a standard two-country new Keynesian model, that under monetary shocks and UIP shocks, stabilizing exchange rate in...
Persistent link: https://www.econbiz.de/10013323762