Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/22154
Authors: 
Bofinger, Peter
Mayer, Eric
Year of Publication: 
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

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