Monetary and Fiscal Policy Rules in the EMU

Aarle Bas van, Florence Huart and Garretsen Harry
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Aarle Bas van: University of Leuven, Oude Markt 13,Leuven, Belgium
Garretsen Harry: Utrecht University,Utrecht, Netherlands

German Economic Review, 2004, vol. 5, issue 4, 407-434

Abstract: This paper studies the design and effects of monetary and fiscal policy in the euro area. To do so, a stylized two-region model of monetary and fiscal policy rules in the EMU is built. We analyse how monetary and fiscal rules affect the adjustment dynamics in the model. Both the effects on the individual countries and on the EMU aggregate economy are studied. Three aspects play an important role in the analysis: (i) the consequences of alternative monetary and fiscal policy rules, (ii) the consequences of asymmetries between EMU countries (asymmetries in macroeconomic shocks and macroeconomic structures), and (iii) the role of alternative degrees of backward- and forward-looking behaviour in consumer decisions and inflation expectations.

Keywords: EMU; fiscal policy; monetary policy (search for similar items in EconPapers)
Date: 2004
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DOI: 10.1111/j.1465-6485.2004.00115.x

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