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Monetary and Fiscal Policy Interaction: The Consequences of Joining a Monetary Union

Jones, Jason Cannon (2009) Monetary and Fiscal Policy Interaction: The Consequences of Joining a Monetary Union. In: UNSPECIFIED.

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    Abstract

    The great experiment in monetary unification across Europe is just beginning to provide the data needed to test the theories and debates surrounding the costs and benefits of forming a union. This paper will explore one particular aspect of the unification process, the effect it had on monetary and fiscal strategic interaction. Using a panel structural VAR to measure monetary and fiscal policy interaction among EMU members before and after joining the EMU, a difference in this interaction is detected. Pre‐EMU the monetary and fiscal authority acted as strategic substitutes in the case of a monetary response to a fiscal receipts shock (such as a discretionary increase in taxes). After the formation of the union this relationship disappears and there is no strategic interaction. The timing of the change suggests a role for the Maastricht treaty coupled with the weak SGP

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    Item Type: Conference or Workshop Item (UNSPECIFIED)
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > economic and financial affairs > EMU/EMS/euro
    EU policies and themes > Policies & related activities > economic and financial affairs > fiscal policy
    EU policies and themes > Policies & related activities > economic and financial affairs > monetary policy
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Conference: European Union Studies Association (EUSA) > Biennial Conference > 2009 (11th), April 23-25, 2009
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 08 Jan 2013 17:09
    Number of Pages: 21
    Last Modified: 08 Jan 2013 17:09
    URI: http://aei.pitt.edu/id/eprint/33072

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