Fiscal policy coordination in currency unions at the effective lower bound

• 成果类型: Article
• 署名作者: Hettig, Thomas; Mueller, Gernot J.
• 署名单位: Eberhard Karls University of Tubingen; Eberhard Karls University of Tubingen; Leibniz Association; Ifo Institut; Centre for Economic Policy Research - UK
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2018.08.009
• 发表日期: 2018
• 页码: 80-98
• 关键词: Currency union; fiscal policy; effective lower bound; COORDINATION; EMU; Terms-of-trade externality; optimal policy

摘要

According to the pre-crises consensus there are separate domains for monetary and fiscal stabilization in a currency union. While the common monetary policy takes care of union-wide fluctuations, fiscal policies should be tailored to meet country-specific conditions. This separation is no longer optimal, however, if monetary policy is constrained by an effective lower bound on interest rates. Specifically, we show that in this case there are benefits from coordinating fiscal policies across countries. By coordinating fiscal policies, policymakers are better able to stabilize union-wide activity and inflation while avoiding detrimental movements of a country's terms of trade. (C) 2018 Elsevier B.V. All rights reserved.