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Macroeconomic stabilization in a heterogeneous monetary union: some insights into the effects of fiscal policy coordination

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  • Cornel Oros

    (Université de Poitiers)

Abstract

This paper studies the effects the fiscal coordination can have in terms of macroeconomic stabilization in a monetary Union which is heterogeneous at the level of the mechanisms of monetary policy transmission. We will use a static Keynesian model in a closed monetary Union and will prove that the stabilization effectiveness depends mainly on the type and origin of the economic shocks affecting the Union members (demand or supply shocks, domestic or foreign shocks) and on the extent of the Union's structural heterogeneity. In the case of the demand shocks, the fiscal policy coordination proves to be an optimal shock absorber only for the countries to which these shocks are specific. In the case of the supply shocks, it can represent an efficient instrument of stabilization especially if the Union''s structural heterogeneity is weak.

Suggested Citation

  • Cornel Oros, 2008. "Macroeconomic stabilization in a heterogeneous monetary union: some insights into the effects of fiscal policy coordination," Economics Bulletin, AccessEcon, vol. 5(34), pages 1-12.
    • Handle: RePEc:ebl:ecbull:eb-08e60015
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    Cited by:

    1. Oros, Cornel & Zimmer, Blandine, 2015. "Uncertainty and fiscal policy in a monetary union: Why does monetary policy transmission matter?," Economic Modelling, Elsevier, vol. 50(C), pages 85-93.
    2. Cornel Oros, 2009. "Economic Governance in an Asymmetric Monetary Union: A Fiscal Policy Game Analysis," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 39-60.
    3. Silviu-Marius SEITAN, 2021. "Financial Stability Aspects In The Conditions Of European Monetary Union," Contemporary Economy Journal, Constantin Brancoveanu University, vol. 6(3), pages 129-139.
    4. Cornel Oros, 2010. "Macroeconomic Stabilization and Asymmetrical Information in a Heterogeneous Monetary Union," Economics Bulletin, AccessEcon, vol. 30(3), pages 1984-1993.

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    More about this item

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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