On the need for fiscal constraints in a monetary union

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44 Scopus citations

Abstract

The desirability of fiscal constraints in monetary unions depends critically on whether the monetary authority can commit to following its policies. If it can commit, then debt constraints can only impose costs. If it cannot commit, then fiscal policy has a free-rider problem, and debt constraints may be desirable. This type of free-rider problem is new and arises only because of a time inconsistency problem.

Original languageEnglish (US)
Pages (from-to)2399-2408
Number of pages10
JournalJournal of Monetary Economics
Volume54
Issue number8
DOIs
StatePublished - Nov 1 2007

Keywords

  • Free riding problem
  • Growth and stability pact
  • International cooperation
  • Time inconsistency

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