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Non-Ricardian fiscal policies in an open monetary union

Javier Andrés (), Fernando Ballabriga and Javier Valles

No 169, European Economy - Economic Papers 2008 - 2015 from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: The fiscal theory of the price level has challenged the conventional view of that monetary factors drive prices and exchange rates and has also provided a rationale for fiscal restrictions in a monetary union. This paper extends the main results of this theory in the context of an open monetary union model. First, it analyzes solutions to the indeterminacy of the exchange rate, some of which have non-standard macroeconomic implications Second, it shows in a calibrated model the consequences for the monetary union of fiscal misdirection in one of its members.

Keywords: Non-Ricardian fiscal policies; exchange rate and price level determination; inflation dynamics; monetary union; Andrés; Ballabriga; Vallés (search for similar items in EconPapers)
Pages: 35 pages
Date: 2002-04
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