Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/107923
Authors: 
Brede, Maren
Year of Publication: 
2014
Series/Report no.: 
SFB 649 Discussion Paper 2014-069
Abstract: 
This paper derives restrictions on monetary and fiscal policies for determinate equilibria in a two-country monetary union with autarkic members. It finds that a central bank following the Taylor principle may not be sufficient for determinacy unless accompanied by one 'active' fiscal authority in the sense of Leeper (1991). Alternatively, both fiscal authorities can be 'active' while the central bank abandons the Taylor principle. The two determinate equilibria have significantly different implications for the transmission of fiscal and monetary shocks and for the fiscal theory of the price level in a monetary union.
Subjects: 
fiscal theory
monetary union
policy coordination
indeterminacy
JEL: 
E31
E52
E62
E63
Document Type: 
Working Paper

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