Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/75853
Authors: 
Beetsma, Roel
Debrun, Xavier
Klaassen, Frank
Year of Publication: 
2001
Series/Report no.: 
CESifo Working Paper 599
Abstract: 
It is widely argued that Europe's unified monetary policy calls for the international coordination at the fiscal level. We survey the issues involved with such coordination of fiscal policy as a demand management tool and we use a simple model to investigate the circumstances under which coordination may be desirable. It turns out that coordination is beneficial when the correlation of the shocks hitting the various economies is low. However, given the potentially adverse reaction by the ECB (as a result of free-riding and/or a conflict on the orientation of the policy mix), fiscal coordination is likely to be counterproductive when demand or supply shocks are highly symmetric across countries and the governments are unable to acquire a strategic leadership position vis-à-vis the ECB.
Subjects: 
EMU
fiscal coordination
shocks
demand management
Document Type: 
Working Paper

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