Monetary and Fiscal Policy in a Large Asymmetric Monetary Union - A Dynamic Three-Country Analysis

Volker Clausen and Hans-Werner Wohltmann

No 2005-18, Economics Working Papers from Christian-Albrechts-University of Kiel, Department of Economics

Abstract: This paper analyzes the dynamic effects of anticipated monetary and fiscal policies in a large monetary union, which is characterized by asymmetric interest rate transmission. We explicitly solve the asymmetric three-country model using the decomposition methods of Aoki (1981) and Fukuda (1993). Anticipated monetary and fiscal expansions lead to negative international spillovers and to intertemporal reversals in the relative effectiveness of policy on member country outputs. Intertemporal international coordination of monetary policies between Euroland and the US is able to stabilize the output adjustment processes induced by an anticipated unilateral fiscal expansion.

Keywords: Monetary Union; Fiscal Policy; Monetary Policy; Policy Coordination (search for similar items in EconPapers)
JEL-codes: E58 F41 (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cauewp:3835

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