Economics at your fingertips  

Strategic fiscal policies and leadership in a monetary union

Georgios Chortareas and Christos Mavrodimitrakis ()

European Journal of Political Economy, 2017, vol. 47, issue C, 133-147

Abstract: We consider the strategic interactions between fiscal and monetary policies in a monetary union when a fiscal authority enjoys a strategic advantage. In particular we depart from the standard literature on strategic interactions in monetary unions in that we solve a three-stage game, where the two national fiscal authorities do not play simultaneously. We find that there is always an incentive for the leader fiscal authority to play a three-stage game, which leaves the other fiscal authority worse off under demand shocks. This choice leads to more (less) volatile union-wide fiscal stance for demand (supply) shocks compared to the standard narrow-coordination case. This volatility is positively related to demand shocks' asymmetries.

Keywords: Monetary union; Fiscal policy; Leadership; Strategic advantage; Stabilization policies (search for similar items in EconPapers)
JEL-codes: E62 E63 E65 F45 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

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:

Access Statistics for this article

European Journal of Political Economy is currently edited by J. De Haan, A. L. Hillman and H. W. Ursprung

More articles in European Journal of Political Economy from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-06-14
Handle: RePEc:eee:poleco:v:47:y:2017:i:c:p:133-147