This paper builds on the discussion paper published by HM Treasury in 2003 alongside the UK Government's assessment of the case for EMU entry. The paper considers the potential for fiscal policy to play a greater role in stabilisation policy if the UK were inside EMU. The paper considers: the...

This paper studies the institutional design of the coordination of macroeconomic stabilization policies within a monetary union in the framework of linear quadratic differential games. A central role in the analysis plays the partitioned game approach of the endogenous coalition formation...

This paper discusses the need and scope for an active fiscal stabilization policy. It is argued that the effectiveness of fiscal policy as a short run stabilizer does not depend on the long run multipliers of (balanced budget) fiscal policies. To the extent that activity can be affected by...

We construct a dynamic stochastic general equilibrium model to study optimal monetary stabilization policy. Prices are fully flexible and money is essential for trade. Our main result is that if the central bank pursues a long-run price path, thereby controlling inflation expectations, it can...

In der Europäischen Union, genauer in den 12 Mitgliedsländern der Euro-Zone, bestimmt die Europäische Zentralbank die Geldpolitik, und die zwölf Mitgliedsländer legen unabhängig voneinander die jeweiligen Fiskalpolitiken fest. Während bei den einen - und dazu zählt Deutschland - eine...

This paper develops a dynamic stochastic general equilibrium model to examine the quantitative macroeconomic implications of countercyclical fiscal policy for France, Germany and the UK. The model incorporates real wage rigidity which is the particular market failure justifying policy...

In this paper we consider a number of key issues related to the policy coordination in a monetary union that has been recently discussed in the literature. To this end we propose a multi-country New-Keynesian model of a monetary union cast in the framework of linear quadratic differential games....

It is widely assumed that a common currency makes it desirable to have also a common fiscal policy. However, if fiscal policy is a source of shocks, independent national fiscal policies are generally preferable because they allow for risk diversification.

This paper is concerned with the apparent change in the U.S. oil price-macroeconomy relationship. It is investigated to what extent this change can be accounted for by the large oil price surges witnessed in the 1970s. The innovative approach of rolling impulse responses is applied and both the...