does monetary unification lead to excessive debt accumulation abstract if discretionary monetary policy gives rise to an inflation bias monetary unification boosts the accumulation of public debt the additional debt accumulation harms welfare if governments are sufficiently myopic in the presence of myopic governments debt ceilings play a useful role in avoiding excessive debt accumulation in a monetary union and allowing a conservative independent central bank to focus on price stability with supply shocks monetary unification results in excessive variability of public debt a debt target that constrains stabilization policy helps to prevent this

rules and discretion with noncoordinated monetary and fiscal policies the time inconsistency of optimal monetary policy is due to the effects of tax distortions thus the issue of how to improve upon the time consistent suboptimal monetary policy is related to that of the coordination of monetary and fiscal policy we present a model with three players the central bark the fiscal authority and wage setters in which distortionary taxes are explicitly modelled we show that binding commitments to monetary rules are not necessarily welfare improving if monetary and fiscal policy are not coordinated we also examine the effects of different degrees of independence of the central bank

rogoff s conservative central banker restored we show that delegation of monetary policy to a weight conservative central banker can be desirable although the government can also use an inflation contract an employment target an inflation target or any combination of these to control the central banker the key feature of our model is a stochastic inflation bias arising when wage setters receive some information about a supply shock prior to signing nominal wage contracts weight conservatism is found to be desirable if fully state contingent delegation is not possible and the stochastic inflation bias cannot be eliminated by optimal choice of the delegation parameters

monetary union in west africa who might gain who might lose and why we develop a model in which governments financing needs exceed the socially optimal level because public resources are diverted to serve the narrow interests of the group in power from a social welfare perspective this results in undue pressure on the central bank to extract seigniorage monetary policy also suffers from an expansive bias owing to the authorities inability to precommit to price stability such a conjecture about the fiscal monetary policy mix appears quite relevant in africa with deep implications for the incentives of fiscally heterogeneous countries to form a currency union we calibrate the model to data for west africa and use it to assess proposed ecowas monetary unions fiscal heterogeneity indeed appears crit ical in shaping regional currency blocs that would be mutually beneficial for all their members in particular nigeria s membership in the configurations currently envisaged would not be in the interests of other ecowas countries unless it were accompanied by effective containment on nigeria s financing needs jel classification e58 e61 e62 f33 union monetaire en afrique de l ouest qui pourrait gagner qui pourrait perdre et pourquoi les auteurs developpent un modele dans lequel les besoins financiers des gouvernements depassent le niveau socialement optimal parce que des ressources pub liques sont detournees de maniere aservir les interets etroits du groupe au pouvoir dans une perspective de bien etre social cela entraine des pressions indues sur la banque centrale pour qu elle extraie du seigneuriage la politique monetaire souffre

central bank independence and public debt policy the various proposals for the institutional design of the european monetary union have drawn fresh attention to the link between monetary and public debt policies this paper explores the strategic interaction between fiscal authorities setting public debt and the central bank controlling monetary policy in the absence of political distortions an optimally designed conservative independent central bank is sufficient to establish the second best in the presence of political distortions or with coordination of monetary and fiscal policy however also a debt target is needed

the allocation of seigniorage in a common currency area this paper considers the allocation of seigniorage in a common currency area with an independent central bank it is shown that if the central bank retains autonomy in the allocation of seigniorage inflation will be suboptimally high and taxes and government spending will be suboptimally low constitutionally mandating the rate of money growth will result in optimal inflation but taxes and government spending will be too low as long as consumers do not put too much weight on public good consumption relative to private it is better to constitutionally mandate seigniorage allocation shares than the level of money growth

the unbearable tightness of being in a monetary union fiscal restrictions and regional stability we study how constrained fiscal policy can affect macroeconomic stability and welfare in a two region model of a monetary union with sticky prices and distortionary taxation both government spending and taxes can be used to stabilize regional variables however the best welfare outcome is obtained under some tax variability and constant regional inflations we use a variety of rules to characterize constrained fiscal policy and find that strict fiscal rules coupled with a monetary policy that targets union wide inflation result in regional inflation stability and the welfare costs of such rules are not as unbearable as one would expect fiscal authorities can enhance welfare by targeting the regional output gap while targeting regional inflation is less successful since inflation stability is guaranteed by the central bank

soft budget constraints taxes and the incentive to cooperate this paper applies the tacit coordination framework to the political macroeconomic context the macroeconomic equilibrium is the outcome of an administration consisting of a large number of decisionmakers whose horizon being endogenously determined by their behavior is uncertain the public imposes a degree of discipline on the policymakers by its option to replace the administration and the administration imposes discipline on the policymakers by monitoring their effective expenditure adverse shocks or a shorter horizon are shown to reduce cooperation among policymakers and increase the inflation rate and the use of discretionary taxes copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

monetary fiscal policy interactions and commitment versus discretion in a monetary union abstract we consider monetary fiscal policy interactions in a monetary union if monetary and fiscal authorities have different ideal output and inflation targets the nash equilibrium output or inflation or both are beyond the ideal points of all authorities leadership of either authority is better fiscal discretion entirely negates the advantage of monetary commitment the optimal monetary rule is equivalent to discretionary leadership of monetary over fiscal policy agreement about ideal output and inflation creates a monetary fiscal symbiosis yielding the ideal point despite disagreement about the relative weights of the two objectives for any order of moves without fiscal co ordination and without monetary commitment

restoring the conservative central banker proposition under monetary fiscal interaction abstract in a model with fiscal policy hughes hallett et al hughes hallett a libich j stehlik p 2009 rogoff revisited the conservative central banker proposition under active fiscal policies economics letters 104 140 143 challenge the relevance of the conservative central banker proposition and other standard results by considering an underlying model which makes the macroeconomic relations more explicit we are able to simplify the analysis and restore the conservative central bank result

monetary conservatism and fiscal coordination in a monetary union abstract in monetary unions time inconsistency provides the rationale for monetary conservativeness and against fiscal coordination however this depends on the assumption of exogenous labor markets once wage setting behavior is explicitly modeled fiscal coordination and less conservative central bankers improve the performance

the macroeconomics of social pacts in this paper we analyze macroeconomic interactions between trade unions the central bank and the fiscal policymaker we explicitly model unions concern for public expenditure paving the way for an analysis of the potential gains from cooperation between the fiscal policymaker and the unions i e the so called corporatist or social pacts that have characterized economic policies in a number of european countries in the last few decades we also highlight the profoundly different incentives generated by institutional arrangements such as the maastricht criteria and the stability and growth pact the former has unambiguously induced more efficient outcomes the latter is likely to backfire

loss of monetary discretion in a simple dynamic policy game abstract we analyze a simple policy game featuring monetary credibility problems and argue that loss of monetary discretion is not advantageous two elements form the basis of our analysis firstly we endogenize the source of credibility problems and secondly we consider a dynamic framework where credibility problems are not time invariant by doing this we are able to demonstrate that credibility problems are temporary and in steady state the government has removed these through sound policies a binding policy rule will only serve as an obstacle towards this steady state

grand corruption instead of commitment reconsidering time inconsistency of monetary policy abstract this paper suggests that inflation may be affected differently by grand corruption compared to its positive nexus with petty corruption in an extended barro and gordon 1983a model grand corruption may serve as a quasi commitment device a cheating expropriating government may actually deter a monetary authority from cheating reneging furthermore rogoff s 1985 conservative central banker has an unambiguously beneficial effect she reduces the inflationary bias even more while also rendering fiscal policy more effective the model nests the standard fiscal monetary interaction logic with and without expropriation as well as the diametrical symbiosis result obtained by dixit and lambertini 2003a

symbiosis of monetary and fiscal policies in a monetary union we consider the interaction between the monetary policy in a monetary union and the separate fiscal policies of the member countries we use a barro gordon type model extended to many countries and fiscal policies each country s fiscal policies inflict externalities on other countries and the common monetary policy has its time consistency problem but if the two types of policymakers agree about the ideal levels of output and inflation then this ideal is attained despite disagreements about the weights of the objectives despite ex post monetary accommodation to fiscal profligacy without fiscal coordination without monetary commitment and for any order of moves

fiscal leadership and central bank design this article investigates the impact on economic performance of the timing of moves in a policy game between the government and the central bank for a government that has both redistributional and stabilization objectives it is shown that both inflation and income inequality are reduced without sacrificing output growth if the government assumes a leadership role compared with a regime in which monetary and fiscal policy are determined simultaneously further it is shown that government leadership benefits both the fiscal and monetary authorities through the enhanced coordination that this arrangement implies jel classification e52 e61 f42

interactions of commitment and discretion in monetary and fiscal policies we consider monetary scal interactions when the monetary authority is more conservative than the scal with both policies discretionary 1 nash equilibrium yields lower output and higher price than the ideal points of both authorities 2 of the two leadership possibilities scal leadership is generally better with scal discretion monetary commitment yields the same outcome as discretionary monetary leadership for all realizations of shocks but scal commitment is not similarly negated by monetary discretion second best outcomes require either joint commitment or identical targets for both authorities output socially optimal and price level appropriately conservative or complete separation of tasks jel e61 e63

the macroeconomic policy mix in a monetary union with flexible inflation targeting abstract policy mix problems may arise in a monetary union with centralized monetary policy and decentralized fiscal policy a consequence of this may be an inappropriate stabilization of shocks this paper addresses how policy coordination problems between fiscal authorities depend on the type of shocks and the objectives of the monetary authority it is shown that non coordinated fiscal policies tend to be too counter cyclical in the case of aggregate shocks and that this bias can be reduced by lowering the weight to output stability in monetary policy oppositely for country specific shocks non coordinated fiscal policies tend to be too pro cyclical and this bias can be reduced by increasing the weight to output stability in monetary policy considering the assignment of policy tasks within the set of binding policy rules for fiscal and monetary policies it is found that flexible inflation targeting dominates strict inflation targeting

exchange rate economics is always and everywhere controversial abstractthis article reviews the major developments in the recent literature on exchange rate economics it is argued that the link between the exchange rate and economic fundamentals is breaking new ground evidence indicates that alternative analytical frameworks such as the new open economy macroeconomics and exchange rate arrangements such as the euro have their theoretical and analytical elegance but are proving empirically very difficult to implement the role of methodological advances and alternative fundamental instruments such as world commodity prices is also highlighted

strategic interactions of fiscal policies in europe a global var perspective abstract the paper analyses the strategic interactions of fiscal policies in the european union context by modelling the interdependencies arising between public and private sectors saving investment balances in a global vector autoregressive framework we use two empirical specifications to reflect some important differences in the sequencing of the policy decision making process in this setting we draw policy implications with respect to fiscal policy coordination and fiscal policy discretion we highlight the importance of several factors such as global capital flows uncertainty with respect to policy actions and nature of the shocks as key elements defining the dimension of the prevailing policy tradeoffs

government finance in a common currency area abstract european integration in 1992 may require greater exchange rate coordination thatn currently exists the delors report goes as far as to recommend the eventual adoption of a single currency however the formation of a common currency area raises fears that independent fiscal policies may produce inferior outcomes this paper shows that lack of cooperation in fiscal policy leads to too little inflation too high taxes and too much government spending jel f33

seigniorage delegation and common currency why monetary unions may fail we provide a parable that can explain why monetary unions havehistorically been dissolved following political separation using a simple model of government finance in a commoncurrency area it is shown that delegation to an inflationary central banker is an optimal policy whencountries struggle for seigniorage revenues whether delegatescoordinate monetary policy or not furthermore a commoncentral bank in which representatives coordinate monetarypolicy will reach an outcome that is pareto inferior to thatproduced by a non cooperative seigniorage war accordingly without political dialogue regarding the designation of therepresentatives a monetary union can fail

participation in a currency union in any voluntary cooperative agreement the potential gain from deviation should determine the minimum influence required over common decision making this paper begins by observing that a highly asymmetric distribution of power between two partners is not sustainable if the choice variables are strategic substitutes it then studies a simple general equilibrium model of a monetary union and shows that a small economy will not take part in the agreement unless it can secure influence that is more than proportional to its size and a transfer of seigniorage revenues in its favor copyright 1992 by american economic association

monetary and fiscal policies interaction in monetary unions in this paper the literature on the interaction between monetary and fiscal policies in a monetary union is surveyed by adopting the concept of symbiosis as a starting point the paper highlights the importance of uncertainty policy makers preferences and targets then the role of commitment to policy rules and coordination is addressed the analysis also focuses on the importance of the data considered for the generation of the policy mix as a final step the paper discusses the main results in the literature on public debt management in a monetary union all the reported theoretical results are then adopted to retrieve policy and institutional implications for the european monetary union

central bank independence and monetary control ing from details these conclusions imply that inflation is lower the higher is cbi and that given independence countries that pre announce monetary policy have even lower rates of inflation furthermore there is no evidence that cbi retards growth or investment as a matter of fact for ldcs the evidence points in the opposite direction low independence is associated with lower growth and investment some economists feel that excessive independence may interfere with the potential stabilisatory function of monetary policy since fluctuations in the growth rate of the economy are found to be unrelated to cbi this does not appear to be the case iii commitment via central bank independence and

the competitive externalities and the optimal seignorage this study analyzes the inflation tax in an economy with several competing decisionmakers who can effectively print more money via the central bank the author derives the sequential rational expectation equilibrium and shows that the presence of competing decisionmakers increases the inflation rate and may put the economy on the wrong side of the inflation tax laffer curve the analysis is interpreted for a country consisting of several states or provinces where the centralized government system is weak similar results apply to the case of competing ministers in an economy where the central bank is weak copyright 1992 by ohio state university press

fiscal policy coordination and emu a dynamic game approach abstract this paper examines the case for fiscal policy coordination in a european economic and monetary union emu a two bloc model with two market structures is examined emu producing a single homogeneous good in both blocs emu1 and a two good emu emu2 where each bloc produces a single home good the european central bank sets monetary policy so as to achieve credibly low inflation rates we find that for emu2 as relative prices can change countries have an incentive to improve their terms of trade leading to an inefficient noncooperative outcome which can be avoided by cooperation

monetary union without fiscal coordination may discipline policymakers abstract with benevolent policymakers and fiscal leadership monetary unification reduces inflation taxes and public spending these disciplining effects of a monetary union which become stronger if the number of participants in the union increases are likely to raise welfare two types of arrangements are considered for the union s common central bank ccb making the ccb more conservative and imposing an inflation target on the ccb in contrast to the results of svensson 1997 svensson l e o 1997 optimal inflation targets conservative central banks and linear inflation contracts american economic review 87 98 114 an optimally designed conservative ccb may outperform inflation targeting finally we find that fiscal coordination offsets the disciplining effects of monetary unification hence subsidiarity in fiscal policymaking may enhance welfare

designing fiscal and monetary institutions for a european monetary union this paper explores the conditions under which aeuropean monetary union emu is an optimum currencyarea the scope for an emu increases with theconvergence of structural and fiscal policies smallmoney holdings a conservative european central bank and dependent national central banks how nationalpolicies affect the rest of the union once the emu hasbeen established is also investigated the case forsurveillance of national structural and fiscalpolicies appears to depend mainly on the monetaryarrangements in the union

fiscal discipline and the choice of exchange rate regime conventional wisdom claims that fixed exchange rates provide more fiscal discipline than do flexible rates but the recent experiences in europe the record of sub saharan countries in the 1980s and the history of stabilization attempts in latin america cast empirical doubts on this wisdom to explore this puzzle we present a standard intertemporal model with perfect capital mobility and price flexibility in which fiscal policy is endogenously determined by a maximizing fiscal authority

energy security measurement a sustainable approach abstract the main objective of this paper is to define new energy security indicator with the long term sustainability and to test it in a sample of 28 european union countries for the period 1990 2012 as well as to determine the level of impact of six different indicators on energy security the previous methodologies for measuring of energy security have been mainly focused on security of supply while not taking into account environmental indicators and the social component the newly proposed indicator energy security index differs from the existing measuring methods precisely in a way that it includes environmental and social aspects energy security index recorded a decline in values in most countries in the period 1990 2000 in the period 2000 2008 the values became positive and after 2008 some countries reported again gradual deterioration the index value varies by year and the biggest positive changes were recorded in the case of the netherlands slovenia and spain the four economically strongest eu countries the united kingdom france germany and italy recorded significantly less fluctuations in energy security over 23 years compared to other countries the data for france and denmark show that an increased share of energy from nuclear and renewable sources can compensate even increased energy import dependence the assessment of impact of individual indicators on energy security index was conducted by using principal component analysis and showed that energy intensity gdp per capita and carbon intensity have the greatest impact the countries of the former eastern bloc are facing particular challenges of energy security which is primarily related to the rapid economic growth and at the same time a high degree of dependence on import of energy generating products in terms of energy security the most stable transition was reported in hungary and poland

the college wage premium and the expansion of higher education in the uk this paper reports estimates of the uk college premium for young graduates across successive cohorts from large cross section datasets for the uk pooled from 1994 to 2006 a period when the higher education participation rate increased dramatically the growth in relative labour demand suggests that graduate supply considerably outstripped demand which ought to imply a fall in the premium we find no significant fall for men and even a large but insignificant rise for women quantile regression results reveal a fall in the premium only for men in the bottom quartile of the distribution of unobserved skills