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Licensed Unlicensed Requires Authentication Published by De Gruyter November 30, 2019

Monetary and Fiscal Policy Rules in the EMU

Bas van Aarle, Florence Huart and Harry Garretsen
From the journal German Economic Review

Abstract

This paper studies the design and effects of monetary and fiscal policy in the euro area. To do so, a stylized two-region model of monetary and fiscal policy rules in the EMU is built. We analyse how monetary and fiscal rules affect the adjustment dynamics in the model. Both the effects on the individual countries and on the EMU aggregate economy are studied. Three aspects play an important role in the analysis: (i) the consequences of alternative monetary and fiscal policy rules, (ii) the consequences of asymmetries between EMU countries (asymmetries in macroeconomic shocks and macroeconomic structures), and (iii) the role of alternative degrees of backward- and forward-looking behaviour in consumer decisions and inflation expectations.

Published Online: 2019-11-30
Published in Print: 2004-12-01

© 2019 by Walter de Gruyter Berlin/Boston