Economic Policy Coordination and Macroeconomic Stabilization in a Heterogeneous Monetary Union

Content Provider	Semantic Scholar
Author	Oros, Cornel
Copyright Year	2008
Abstract	In the context of a heterogeneous monetary union, this paper tries to identify an optimal level of coordination between economic policies that would be able to offset the effects of shocks hitting the economy. We consider that a variable geometry coordination between economic policies can be profitable in terms of stabilization. Therefore, we take into account an intermediate coordination between national governments, that is a coordination within regional groupings consisting of countries with very similar structural features. Our aim is to assess whether fiscal coordination at grouping level is productive or counterproductive compared with a lack of coordination or a full coordination between all European countries? We show that the effectiveness of stabilization depends on two elements: on the one hand, the type and the degree of the heterogeneities between groupings, on the other hand the type of game configuration in which the national governments and the central bank are involved (Nash equilibrium, Stackelberg equilibrium or full coordination equilibrium). At the same time, macroeconomic stabilization hinges on the sign of the spillovers between groupings and on the constraints that may influence authorities in freely using their policy instruments.
Starting Page	77
Ending Page	108
Page Count	32
File Format	PDF HTM / HTML
Alternate Webpage(s)	http://rief.univ-paris1.fr/Rennes2007/63-Oros.pdf
Language	English
Access Restriction	Open
Content Type	Text
Resource Type	Article