• Graduate program
  • Research
  • News
  • Events
    • Summer School
      • Climate Change
      • Gender in Society
      • Inequalities in Health and Healthcare
      • Business Data Science Summer School Program
      • Receive updates
    • Events Calendar
    • Events Archive
    • Tinbergen Institute Lectures
    • Conference: Consumer Search and Markets
    • Annual Tinbergen Institute Conference
  • Summer School
    • Climate Change
    • Gender in Society
    • Inequalities in Health and Healthcare
    • Business Data Science Summer School Program
    • Receive updates
  • Alumni
  • Magazine

Beetsma, R. and Jensen, H. (2005). Monetary and Fiscal Policy Interactions in a Micro-Founded Model of a Monetary Union Journal of International Economics, 67(2):320--352.

  • Journal
    Journal of International Economics
View publication

This paper analyzes in detail the mechanisms behind fiscal stabilization policy and the role of policy commitment in a micro-founded New-Keynesian model of a two-country monetary union, which is hit by supply shocks. We also explore the determinants of the gains from fiscal stabilization. While monetary policy with identical union members is concerned with stabilizing the union-wide economy, fiscal policy aims at stabilizing inflation differences and the terms of trade. Besides exploring optimal policies, we also consider monetary and fiscal rules. We study these rules both under coordination and non-coordination by the fiscal authorities.