Coordination and Stabilization Gains of Fiscal Policy in a Monetary Union

Susana Salvado ()
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Susana Salvado: FEUNL, GEE

No 13, GEE Papers from Gabinete de Estratégia e Estudos, Ministério da Economia

Abstract: The issue of fiscal coordination in a Monetary Union is recurrent as monetary policy can no longer be used as a national stabilization policy instrument. We measure the increase in welfare due to the coordination of fiscal policies in the typical Neo-Keynesian environment, where monetary policy would have significantive and persistent real effects. We propose a decomposition of coordination gains into a deterministic and a stochastic parcel. We show that the deterministic fiscal coordination gain is high but that the stochastic gain, often called stabilization gain, is very small generating, for our calibration, an increase of 0.0161 percentage points, measured in consumption equivalents.

Keywords: Coordination; Fiscal Policy; Gains; Nash. (search for similar items in EconPapers)
JEL-codes: E61 E62 F41 F42 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2009-03, Revised 2009-03
New Economics Papers: this item is included in nep-cba and nep-mac
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https://www.gee.gov.pt/RePEc/WorkingPapers/GEE_PAPERS_13.pdf First version, 2009 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:mde:wpaper:0013

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