A Conceptual Framework for Reforms Versus Debt in the Context of a Fiscal Union Within the European Monetary Union

Yannis Ioannides

A chapter in The Euro and the Crisis, 2017, pp 153-171 from Springer

Abstract: Abstract This paper emphasizes the importance of differences in population sizes in a model of a monetary union under alternative scenaria of monetary and fiscal policy coordination. It goes beyond Casella (The American Economic Review 82(4):847–863, 1992) by allowing for coexistence of fiscal policy, national as well as union-wide, along with monetary policy. The paper also allows for inefficiencies in tax collection that serve as another difference across countries and for the possibility that tax and spending policy in the union are decided by means of different procedures. This is intended to explore the contrast between monetary policy outcomes determined by deliberations and voting in the ECB, given the fiscal policy stance, and national fiscal policy stance, given monetary policy. It examines what options this logic confers on smaller versus larger members of a currency union. It goes beyond both Casella (The American Economic Review 82(4):847–863, 1992) and Ioannides (The Cyprus Bail-in: Policy Lessons from the Cyprus Economic Crisis. World Scientific Imperial College Press, 2016) in examining the impact of market reforms and of various types of technological progress and explores their consequences for the sustainability of national public debt.

Keywords: Monetary union; Fiscal policy; International interaction of monetary and fiscal policy; Game-theoretic models of international monetary policy coordination; Debt finance vs. tax finance vs. monetary policy; Technological change vs. debt reform; E52; E63; F45; F41 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:spr:fimchp:978-3-319-45710-9_11

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DOI: 10.1007/978-3-319-45710-9_11

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