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Title:Monetary and Fiscal Policy Interaction in the Euro Area with different assumptions on the Phillips curve PDF Logo
Authors:Bofinger, Peter
Mayer, Eric
Issue Date:2004
Series/Report no.:CeGE discussion paper 27
Abstract:In this paper we carry over a static version of a New Keynesian Macro Model to a monetary union. For a similar approach see Uhlig (2002). We will show in particular that a harmonious functioning of a monetary union critically depends on the correlation structure of shocks that hit the currency area. Additionally a high degree of integration in product markets is advantageous for the ECB as it prevents that national real interest rates can drive a wedge between macroeconomic outcomes across member states. In particular small countries are in a vulnerable and therefore in need for fiscal policy as an independent stabilization agent with room to breath.
Subjects:Monetary policy
inflation targeting
fiscal policy
policy coordination
freeriding
JEL:E50
H70
E60
Document Type:Working Paper
Appears in Collections:cege-Diskussionspapiere, Universität Göttingen

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