Taylor Rule in a Policy-Mix Analysis for Open Heterogeneous Monetary Unions

Florina Cristina Badarau and Andreea Curmei-Semenescu
Additional contact information
Florina Cristina Badarau: Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales - UB - Université de Bordeaux

Post-Print from HAL

Abstract: The paper studies, at a purely theoretical level, the monetary-fiscal policy-mix in an open currency union with asymmetric monetary transmission, where the central bank follows an interest rate Taylor rule. It shows that under the optimal monetary policy regime, the fiscal policy can stimulate the output without any impact on inflation. However, if the monetary rule deviates from the optimum, a stabilization bias appears. It can be reduced by a tighter monetary policy, but the heterogeneous monetary transmission produces asymmetric national reactions to shocks. For asymmetric fiscal shocks, output divergences can increase permanently and only a union-wide fiscal strategy accounting for national structural asymmetries can avoid them..

Date: 2017
References: Add references at CitEc
Citations:

Published in The Review of Finance and Banking, 2017, 9 (2), pp.063-081

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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: https://EconPapers.repec.org/RePEc:hal:journl:hal-03896710

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().