Monetary and Fiscal policy Interaction in the Euro Area with Different Assumptions on the Phillips Curve

No 4790, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In this Paper we carry over a static version of a New Keynesian Macromodel a la Clarida Gali Gertler (1999) to a monetary union. We will show in particular that a harmonious functioning of a monetary union critically depends on the correlation of shocks that hit the currency area. Additionally a high degree of integration in product markets is advantageous for the ECB as it prevents that national real interest rates can drive a wedge between macroeconomic outcomes across member states. In particular small countries are vulnerable and therefore in need of fiscal policy as an independent stabilization agent with room to breath.

Keywords: Monetary policy; Inflation targeting; Fiscal policy; Policy coordination (search for similar items in EconPapers)
JEL-codes: E50 E60 H70 (search for similar items in EconPapers)
Date: 2004-12
New Economics Papers: this item is included in nep-cba, nep-fmk, nep-mac, nep-mon and nep-pbe
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Monetary and Fiscal Policy Interaction in the Euro Area with Different Assumptions on the Phillips Curve (2007)
Working Paper: Monetary and Fiscal Policy Interaction in the Euro Area with different assumptions on the Phillips curve (2004)
Working Paper: Monetary and fiscal policy interaction in the Euro area with different assumptions on the Phillips curve (2003)
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