Unconventional policies in a monetary union: a policy game approach

Manuela Mischitelli () and Giovanni Di Bartolomeo ()

No 6910183, Proceedings of Economics and Finance Conferences from International Institute of Social and Economic Sciences

Abstract: How does the availability of fiscal and unconventional monetary measures modify the composition of the optimal policy mix, in a monetary union, when ZLB is binding? In order to answer to this question, we have built a simply three-period generalized New Keynesian model, in which we have assumed that non-money assets are not perfect substitutes. Following Friedman (2013), private agents' choice is responsive to a sort of long run interest rate.We have proved that in a monetary union, greater is the number of member countries adopting autonomous fiscal policy, greater will be public spending and more moderate will be the use of unconventional policies measures by central bank. Anyway, deviations in output and inflation decrease with the enlargement of the monetary union.

Keywords: Unconventional Monetary policies; ZLB; Fiscal policy; Quantitative Easing; Forward Guidance; Policy game (search for similar items in EconPapers)
JEL-codes: C70 E52 E60 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2018-10
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
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Published in Proceedings of the Proceedings of the 10th Economics & Finance Conference, Rome, Oct 2018, pages 383-405

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Persistent link: https://EconPapers.repec.org/RePEc:sek:iefpro:6910183

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