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Clausen, Volker
Wohltmann, Hans-Werner
Year of Publication: 
Series/Report no.: 
Diskussionsbeiträge aus dem Fachbereich Wirtschaftswissenschaften, Universität - Gesamthochschule - Essen 119
This paper investigates the dynamic effects of monetary and fiscal policy in a monetary union, which is characterized by asymmetric interest rate transmission. This asymmetry gives rise to intertemporal reversals in the relative effectiveness of policy on member country outputs. The direction and the number of these reversals depend on whether policies are unanticipated or anticipated. We also study the coordination between monetary and fiscal policy in a monetary union. Monetary policy may completely stabilize European output after unanticipated fiscal policy shocks. With anticipated fiscal policy shocks, complete stabilization throughout the overall adjustment process requires monetary policy to be time-inconsistent.
European Monetary Union
fiscal policy
monetary policy
policy coordination
spillover effects
time inconsistency
Document Type: 
Working Paper

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