The Policy Mix

Hubert Kempf
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Hubert Kempf: École Normale Supérieure Paris-Saclay

Chapter 7 in Monetary Unions, 2022, pp 233-271 from Springer

Abstract: Abstract Chapter 7 studies the policy mix in a monetary union. The possibility to reach an optimal policy mix such that a monetary union functions smoothly and perfectly stabilizes cycles appears irrealistic. The very existence of a monetary union makes insulation impossible, contrarily to what happens in a flexible exchange rate world: No member country can be made fully independent from the fiscal impulses coming from the other member countries. Therefore the institutional design of a monetary union is of central importance. Addressing the issue of policy dominance, a variant of the model discussed in Chap. 3 including fiscal variables is analysed. It shows that no specific design can be thought of as superior in any circumstances.

Date: 2022
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DOI: 10.1007/978-3-030-93232-9_7

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