Macroeconomic Stabilization Policies in the EMU: Spillovers, Asymmetries, and Institutions

Giovanni Di Bartolomeo (), Jacob Engwerda (), Joseph E. Plasmans (), Bas van Aarle () and Tomasz Pawel Michalak

No CESifo Working Paper No. 1376, CESifo Working Paper Series from CESifo Group Munich

Abstract: This paper studies the institutional design of the coordination of macroeconomic stabilization policies within a monetary union in the framework of linear quadratic differential games. A central role in the analysis plays the partitioned game approach of the endogenous coalition formation literature. The specific policy recommendations in the EMU context depend on the particular characteristics of the shocks and the economic structure. In the case of a common shock, fiscal coordination or full policy coordination is desirable. When asymmetric shocks are considered, fiscal coordination improves the performance but full policy coordination doesn’t produce further gains in policymakers’ welfare.

Keywords: macroeconomic stabilization; EMU; coalition formation; linear quadratic differential games (search for similar items in EconPapers)
JEL-codes: C70 E17 E58 E61 E63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-mac and nep-mon
Date: 2005
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Related works:
Working Paper: Macroeconomic stabilisation policies in the EMU: Spillovers, asymmetries and institutions (2003)
Journal Article: MACROECONOMIC STABILIZATION POLICIES IN THE EMU: SPILLOVERS, ASYMMETRIES AND INSTITUTIONS (2006)
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