Fiscal Aspects of Monetary Integration in Europe

Frederick (Rick) van der Ploeg

No 340, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: An adverse supply shock hits a two-country Mundell-Fleming world and causes unemployment and a higher cost of living. The optimal fiscal policies under noncooperative and under international policy coordination are then contrasted under three alternative regimes: floating exchange rates with hegemony (such as the EMS), and fixed exchange rates with symmetry (such as the EMU). The welfare loss depends on unemployment, real income and budgetary imbalance. There is also an examination of the effects of economic integration ("1992"), of indexation of wages to the cost of living, and of interactions between Europe and the US. The results shed some light on the recent proposals of the Delors Committee for economic and monetary union in Europe.

Keywords: Exchange Rates; Fiscal Policy; Monetary Integration; Policy Coordination (search for similar items in EconPapers)
Date: 1989-08
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Related works:
Working Paper: FISCAL ASPECTS OF MONETARY INTEGRATION IN EUROPE (1989)
Working Paper: Fiscal aspects of monetary integration in Europe (1989)
Working Paper: Fiscal aspects of monetary integration in Europe (1989)
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