Fiscal policy coordination in currency unions at the effective lower bound

Müller, Gernot
Authors registered in the RePEc Author Service: Gernot J. Müller

No 11780, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: According to the pre-crises consensus there are separate domains for monetary and fiscal stabilization in a currency union. While the common monetary policy takes care of union-wide fluctuations, fiscal policies should be tailored to meet country-specific conditions. This separation is no longer optimal, however, if monetary policy is constrained by an effective lower bound on interest rates. Specifically, we show that in this case there are benefits from coordinating fiscal policies across countries. By coordinating on a common fiscal stance, policy makers are able to stabilize union-wide activity and inflation while avoiding detrimental movements of a country's terms of trade.

Keywords: Fiscal policy; Effective lower bound; Coordination; Emu; Terms-of-trade externality; Optimal policy; Currency union (search for similar items in EconPapers)
JEL-codes: E61 E62 F41 (search for similar items in EconPapers)
Date: 2017-01
New Economics Papers: this item is included in nep-mac and nep-opm
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://cepr.org/publications/DP11780 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Fiscal policy coordination in currency unions at the effective lower bound (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:11780

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP11780

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().