Monetary union without fiscal coordination may discipline policymakers

R.M.W.J. Beetsma, A.L. Bovenberg

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Abstract

We show that, with benevolent policymakers and fiscal leadership, monetary unification reduces inflation, taxes and public spending. These disciplining effects of a monetary union, which rise with the number of fiscal players in the union, are likely to raise welfare. Joining an optimally designed monetary union is particularly attractive if fiscal authorities do not care about inflation. Fiscal coordination offsets the disciplining effects of monetary unification. Hence, subsidiarity in fiscal policymaking may enhance welfare.
Original languageEnglish
PublisherUnknown Publisher
Number of pages18
Volume1995-59
Publication statusPublished - 1995

Publication series

NameCentER Discussion Paper
Volume1995-59

Keywords

  • Taxation
  • Central Banks
  • Monetary Policy
  • Monetary Integration
  • Fiscal Policy
  • welfare economics

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    Beetsma, R. M. W. J., & Bovenberg, A. L. (1995). Monetary union without fiscal coordination may discipline policymakers. (CentER Discussion Paper; Vol. 1995-59). Unknown Publisher.