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COORDINATION OF MONETARY AND FISCAL POLICY IN A MONETARY UNION: POLICY ISSUES AND ANALYTICAL MODELS
Author(s) -
CANZONERI MATTHEW B.
Publication year - 2007
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2007.01036.x
Subject(s) - economics , monetary policy , currency , inflation (cosmology) , fiscal policy , currency union , macroeconomics , european monetary union , fiscal union , work (physics) , european union , monetary economics , keynesian economics , international economics , mechanical engineering , physics , theoretical physics , engineering
The European Monetary Union raises new and interesting questions about the coordination of monetary and fiscal policy. In this lecture, I discuss some of these questions and the answers that a new class of models—new neoclassical synthesis (NNS) models—is currently giving to them. I will argue that the new questions expose some weaknesses in current NNS modeling; in particular, the models do not seem to explain the positive correlation between national inflation and growth differentials that has been observed in the European data. I also review some recent work that has been done on policy coordination within a currency union.