Does Monetary Unification Lead to Excessive Debt Accumulation?

Roel Beetsma and Lans Bovenberg

No 1299, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: If discretionary monetary policy implies an inflation bias, monetary unification boosts the accumulation of public debt. The additional debt accumulation is welfare reducing only if governments are sufficiently myopic. In the presence of myopic governments, debt ceilings play a useful role in avoiding excessive debt accumulation in a monetary union and allow a conservative, independent central bank to focus on price stability.

Keywords: Common Central Bank; Credibility Effect; Government Myopia; Monetary Union; Optimal Debt Target; Price Stability Weight (search for similar items in EconPapers)
JEL-codes: E52 E58 E61 E62 (search for similar items in EconPapers)
Date: 1995-11
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Citations: View citations in EconPapers (14)

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Related works:
Journal Article: Does monetary unification lead to excessive debt accumulation? (1999)
Working Paper: Does Monetary Unification Lead to Excessive Debt Accumulation? (1995)
Working Paper: Does monetary unification lead to excessive debt accumulation (1995)
Working Paper: Does monetary unification lead to excessive debt accumulation (1995)
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