Macroeconomic Stabilization Policies in the Emu: Spillovers, Asymmetries and Institutions

24 Pages Posted: 8 Aug 2006

See all articles by Joseph Plasmans

Joseph Plasmans

University of Antwerp - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Tilburg University

Jacob C. Engwerda

retiree

Bas Van Aarle

Leuven Centre for Irish Studies LCIS; CESifo (Center for Economic Studies and Ifo Institute); Radboud University Nijmegen - Department of Economics

Tomasz Michalak

University of Antwerp - Department of Economics

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Abstract

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 literature. The specific policy recommendations in the European Economic and Monetary Union (EMU) context depend on the particular characteristics of the shocks and the economic structure. In the case of a common shock, fiscal coordination or full policy coordination is desirable. When anti-symmetric shocks are considered, fiscal coordination improves the performance but full policy coordination does not produce further gains in policymakers' welfare.

Suggested Citation

Plasmans, Joseph E. J. and Engwerda, Jacob C. and van Aarle, Bas and Michalak, Tomasz, Macroeconomic Stabilization Policies in the Emu: Spillovers, Asymmetries and Institutions. Scottish Journal of Political Economy, Vol. 53, No. 4, pp. 461-484, September 2006, Available at SSRN: https://ssrn.com/abstract=923195 or http://dx.doi.org/10.1111/j.1467-9485.2006.00390.x

Joseph E. J. Plasmans (Contact Author)

University of Antwerp - Department of Economics ( email )

Prinsstraat 13
Antwerp, B-2000
Belgium

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Tilburg University

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Tilburg, DC Noord-Brabant 5000 LE
Netherlands

Jacob C. Engwerda

retiree ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
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Bas Van Aarle

Leuven Centre for Irish Studies LCIS ( email )

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Leuven, 3000
Belgium
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+32 16 310431 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

Radboud University Nijmegen - Department of Economics ( email )

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6500 HK Nijmegen
Netherlands
+31 24 3616172 (Phone)
+31 24 3611846 (Fax)

Tomasz Michalak

University of Antwerp - Department of Economics ( email )

Prinsstraat 13
Antwerp, B-2000
Belgium

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