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Optimal Fiscal Policy Rules in a Monetary Union.

Abstract:
This paper investigates the importance of fiscal policy in providing macroeconomic stabilisation in a monetary union. We use a microfounded New Keynesian model of a monetary union which incorporates persistence in inflation and non-Ricardian consumers, and derive optimal simple rules for fiscal authorities. We find that fiscal policy can play an important role in reacting to inflation and output, but that not much is lost if national fiscal policy is restricted to react only to national differences in inflation and output.

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Authors


Tatiana Kirsanova More by this author
Mathan Satchi More by this author
David Vines More by this author
Simon Wren-Lewis More by this author
Volume:
5533
Publication date:
2006
URN:
uuid:71c13c5a-7110-4efa-867d-d36d085605be
Local pid:
oai:economics.ouls.ox.ac.uk:11610
Language:
English

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