Resource title

Monetary and Fiscal Policy Interaction in the Euro Area with different assumptions on the Phillips curve

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Resource description

In this paper we carry over a static version of a New Keynesian Macro Model to a monetary union. For a similar approach see Uhlig (2002). We will show in particular that a harmonious functioning of a monetary union critically depends on the correlation structure 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 in a vulnerable and therefore in need for fiscal policy as an independent stabilization agent with room to breath.

Resource author

Peter Bofinger, Eric Mayer

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Resource language

eng

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text/html

Resource resource URL

http://hdl.handle.net/10419/22154

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Adapt according to the presented license agreement and reference the original author.