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Title:Macroeconomic policy in a heterogeneous Monetary Union PDF Logo
Authors:Grimm, Oliver
Ried, Stefan
Issue Date:2007
Series/Report no.:SFB 649 discussion paper 2007,028
Abstract:We use a two-country model with a central bank maximizing union-wide welfare and two fiscal authorities minimizing comparable, but slightly different country-wide losses. We analyze the rivalry between the three authorities in seven static games. Comparing a homogeneous with a heterogeneous monetary union, we find welfare losses to be significantly larger in the heterogeneous union. The best-performing scenarios are cooperation between all authorities and monetary leadership. Cooperation between the fiscal authorities is harmful to both the whole union's and the country-specific welfare.
Subjects:monetary union
heterogeneities
policy game
simultaneous policy
sequential policy
coordination
discretionary policies
JEL:E52
E61
F42
Document Type:Working Paper
Appears in Collections:SFB 649 Discussion Papers, HU Berlin

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