Correcting Macroimbalances in a Monetary Union: An Evaluation of Alternative Fiscal Policy Rules

M Lossani and Patrizio Tirelli

The Manchester School of Economic & Social Studies, 1993, vol. 61, issue 3, 248-69

Abstract: In a monetary union, fiscal policy may replace exchange rate flexibility in the face of asymmetric shocks. But targets should be carefully selected: setting nominal income targets may be counterproductive, generating instability. This happens because the loss of exchange rate flexibility establishes a close link between inflation differences and real exchange rate dynamics. By controlling the internal objective, fiscal policy resists those real exchange rate swings that might be needed to avoid cumulative wealth imbalances. In contrast, mutually consistent foreign wealth targets may be beneficial. Copyright 1993 by Blackwell Publishers Ltd and The Victoria University of Manchester

Date: 1993
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:manch2:v:61:y:1993:i:3:p:248-69

Access Statistics for this article

More articles in The Manchester School of Economic & Social Studies from University of Manchester Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().