We propose a simple framework within which to examine the problem of policy coordination between two central banks. The context is the various components of a broad measure of the money supply. Consider two central banks, one'monetarist' and the other 'Keynesian'. In each economy there is...

What kind of additional co-operation (-ordination) is necessary and feasible to cope with the new institutional set-up under EMU? Starting from the episode of the repo rate cut by the ECB in early 1999, it is asked what would have happened under a business as usual scenario. In this case, the...

The current instruments in the EU to deal with debt and liquidity crises include the European Financial Stability Facility (EFSF) and the European Financial Stabilisation Mechanism (EFSM). Both are temporary in nature (3 years). In terms of an efficient future crisis management framework one has...

High equilibrium unemployment and the inflation bias in some EU countries require fundamental reforms of labour-market institutions. Impacts of different monetary regimes inside and outside EMU on the incentives for labour- market reforms are examined in a Barro- Gordon framework from the...

The subsidiarity principle governing the collection of statistical data in a monetary union may result in asymmetrical information. The national governments may be tempted to distort their economic and financial data communicated to the union’s central bank in order to influence its monetary...

This paper analyses the interaction between a common monetary policy and differentiated labour market institutions. We develop a model of a two country monetary union. In each country, labour markets are distinguished by the degree of centralisation in wage bargaining. In each country the...

We show that the domestic output increases with a foreign country's structural reform and decreases with foreign country’s fiscal policy. Hence, when governments act non-cooperatively, they implement too low structural reforms and too much fiscal policies.

The fiscal policy rule implicit in the Stability and Growth Pact, has been rationalised as a way to ensure that national fiscal policies remain sustainable within the EU, thereby endorsing the independence of the ECB. We empirically examine the sustainability of European fiscal policies over the...

The analysis deals with the conditions under which coordination is attractive to a country in the flexible exchange-rate system. In particular, great weight is attached to the design of a common policy-decision council. The starting point is the Barro- Gordon approach, which is extended to...

This paper examines whether individual countries’ data show that FDI inflows facilitate capital flight and whether capital flight occurs due to poor domestic investment climate or is it due to discriminatory treatment against residents’ investment. Three capital flight measures are used....