On the Desirability of Fiscal Constraints in a Monetary Union

V.V. Chari, Patrick J. Kehoe

The desirability of fiscal constraints in monetary unions depends critically on whether the monetary authority can commit to follow its policies. If it can commit, then debt constraints can only impose costs. If it cannot commit, then fiscal policy has a free-rider problem, and debt constraints may be desirable. This type of free-rider problem is new and arises only because of a time inconsistency problem

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Year of publication:	January 2004
Authors:	Chari, V.V.
Other Persons:	Kehoe, Patrick J. (contributor)
Institutions:	National Bureau of Economic Research (contributor)
Publisher:	Cambridge, Mass : National Bureau of Economic Research
Subject:	Währungsunion \| Monetary union \| Theorie \| Theory \| Finanzpolitik \| Fiscal policy \| Öffentliche Schulden \| Public debt \| Trittbrettfahrerverhalten \| Free rider problem

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