This paper assesses how monetary authorities behave and how they interact. Pooled data for the 15 members of the European Union except Luxembourg and five other OECD countries serves to answer these questions. Three basic conclusions emerge. First, fiscal policy responds to the ratio of public...

This paper analyses and compares the effects of common demand and supply shocks on the setting of optimal monetary policies under a clean float, a managed exchange rate system (such as the EMS) and a monetary union, when welfare depends on unemployment and the cost of living. The results suggest...

It is shown that, when there is a genuine long-run trade-off between inflation and output, coordination under pre-commitment yields substantial improvements in economic welfare. The analysis is conducted within the context of a two-country model with capital accumulation, immobile labour,...

We analyze a two-country zone facing a joint inflationary shock and responding with coordinated and uncoordinated monetary and fiscal policies. We show that the standard presumption that the absence of coordination results in an excessive exchange rate appreciation of the zone with respect to...

The development of the seven main OECD economies during the 1970s and 1980s is discussed. Subsequently, wage equations of the error-correction type for the seven largest OECD economies are estimated. The hypothesis of real wage rigidity cannot be rejected for the French, German, Italian and...

In this paper we examine the international implications of monetary union in the European Community (EMU) and the associated international costs and benefits. We consider prospective changes in international institutions, the potential role of the ecu as an international currency, and the...

This paper extends earlier work (Kenen, 1987a, 1987b) on the ranking of exchange rate regimes. Using a two-country portfolio-balance model, it asks how pegged and floating exchange rates affect each country's ability to achieve its domestic policy objectives independently, without having to...

This paper illustrates some of the most important insights of the literature on international fiscal and monetary policy coordination. It notes that the analysis of international policy interactions is enriched by taking the incentives in the domestic policy process into account. These...

The interdependence of national economies implies externalities in policy making, and these externalities lead to inefficient outcomes when policy-making is decentralised and independent. These externalities have been well documented from a theoretical point of view. This paper reports our...

The persistence of large trade and budget imbalances has led to increasing demands for protectionist policies. Despite a substantial theoretical literature there appears to be no empirical literature on the use of tariffs as a macroeconomic policy instrument. This paper fills that gap, using the...