Optimal Fiscal Policy Rules in a Monetary Union

David Vines, Simon Wren-Lewis, Tatiana Kirsanova and Mathan Satchi

No 5533, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper investigates the importance of fiscal policy in providing macroeconomic stabilisation in a monetary union. We use a microfounded New Keynesian model of a monetary union which incorporates persistence in inflation and non-Ricardian consumers, and derive optimal simple rules for fiscal authorities. We find that fiscal policy can play an important role in reacting to inflation and output, but that not much is lost if national fiscal policy is restricted to react only to national differences in inflation and output.

Keywords: Optimal monetary policy and fiscal policies; Monetary union; Simple rules (search for similar items in EconPapers)
JEL-codes: E52 E61 E63 F41 (search for similar items in EconPapers)
Date: 2006-03
New Economics Papers: this item is included in nep-cba, nep-mac and nep-pbe
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Optimal Fiscal Policy Rules in a Monetary Union (2007)
Journal Article: Optimal Fiscal Policy Rules in a Monetary Union (2007)
Working Paper: Optimal Fiscal Policy Rules in a Monetary Union (2006)
Working Paper: Optimal Fiscal Policy Rules in a Monetary Union (2005)
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