Macroeconomic Policy in a Heterogeneous Monetary Union

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Economics Working Paper Series ; No. 07/67

Classification and Topics

• Classification: Wirtschaft ; Monetary Policy ; Policy Objectives; Policy Designs and Consistency; Policy Coordination ; International Policy Coordination and Transmission
• Subject: monetary union ; heterogeneities ; policy game ; simultaneous policy ; sequential policy ; coordination ; discretionary policies ; Währungsunion ; Finanzpolitik ; Geldpolitik ; Wohlfahrtsanalyse ; Spieltheorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Grimm, Oliver ; Ried, Stefan
• Event: Veröffentlichung
• (who): ETH Zurich, CER-ETH - Center of Economic Research
• (where): Zurich
• (when): 2007

Further information

• DOI: doi:10.3929/ethz-a-005390575
• Handle: http://hdl.handle.net/10419/171510
• Last update: 10.03.2025, 11:41 AM CET