Élargissement de l'Union monétaire et coordination des politiques budgétaires: un point de vue

Patrick Villieu

Annals of Economics and Statistics, 2000, issue 59, 137-163

Abstract: Is fiscal coordination a necessary complement of EMU Enlargement? Or may enlargement of the Monetary Union be an efficient substitute for fiscal coordination? In a simple monetary-fiscal policy game, Monetary Union enlargement has two opposite effects: 1) Optimal inflation is higher on average, and welfare is lower with decentralized fiscal policy than with centralized fiscal policy. Moreover, when fiscal policies are decentralized, they inefficiently react to supply symmetric shocks, which again reduces welfare. Enlargement of the Monetary Union exacerbates these two problems and increases fiscal coordination benefits. 2) Nevertheless, enlargement of the Monetary Union decreases the fiscal authorities' temptation to resort to "beggar thy neighbor" policies when asymmetric demand shocks arise, and thus may constitute a good substitute for fiscal coordination.

Date: 2000
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Related works:
Working Paper: Elargissement de l'Union monétaire et coordination des politiques budgétaires: un point de vue (2000)
Working Paper: Elargissement de l'Union monétaire et coordination des politiques budgétaires: un point de vue (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:2000:i:59:p:137-163

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