On the Desirability of Fiscal Constraints in a Monetary Union

Varadarajan Chari () and Patrick J. Kehoe ()

No 10232, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The desirability of fiscal constraints in monetary unions depends critically on whether the monetary authority can commit to follow its policies. If it can commit, then debt constraints can only impose costs. If it cannot commit, then fiscal policy has a free-rider problem, and debt constraints may be desirable. This type of free-rider problem is new and arises only because of a time inconsistency problem.

JEL-codes: F3 F4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-ifn, nep-mac and nep-rmg
Date: 2004-01
Note: EFG IFM
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Working Paper: On the desirability of fiscal constraints in a monetary union (2003)
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