Fiscal and Monetary Interaction: The Role of Asymmetries of the Stability and Growth Pact in EMU

Matteo Governatori () and Sylvester Eijffinger ()

No CESifo Working Paper No. 1354, CESifo Working Paper Series from CESifo Group Munich

Abstract: The paper builds a simplified model describing the economy of a currency union with decentralised national fiscal policy, where the main features characterising the policy-making are similar to those in EMU. National governments choose the size of deficit taking into account the two main rules of the Stability and Growth Pact on public finance. Unlike previous literature the asymmetric working of those rules is explicitly modelled in order to identify its impact on the Nash equilibrium of deficits arising from a game of strategic interaction between fiscal authorities in the union.

Keywords: Stability and Growth Pact; EMU; asymmetric fiscal rules; decentralised fiscal policy (search for similar items in EconPapers)
JEL-codes: E61 H30 H60 H70 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac, nep-mon and nep-pbe
Date: 2004
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Working Paper: Fiscal and Monetary Interaction: The Role of Asymmetries of the Stability and Growth Pact in EMU (2004)
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