Macroeconomic Stabilisation policies in the EMU: Spillovers, Asymmetries and Institutions

B. van Aarle, G di Bartolomeo, J Engwerda, J Plasmans

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Abstract

This paper studies the institutional design of the coordination of macroeconomic stabilization policies within a monetary union in the framework of linear quadratic differential games. A central role in the analysis plays the partitioned game approach of the endogenous coalition formation literature. The specific policy recommendations in the european economic and monetary union (emu) context depend on the particular characteristics of the shocks and the economic structure. In the case of a common shock, fiscal coordination or full policy coordination is desirable. When anti-symmetric shocks are considered, fiscal coordination improves the performance but full policy coordination does not produce further gains in policymakers' welfare.
Original languageEnglish
Pages (from-to)461-484
JournalScottish Journal of Political Economy
Volume53
Issue number4
DOIs
Publication statusPublished - 1 Jan 2006

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