Should the ECB Coordinate EMU Fiscal Policies?
by Tatiana Kirsanovaa, Celsa Machadob, and Ana Paula Ribeiroc
In a monetary union where fiscal authorities act strategically,
fiscal cooperation is unlikely to emerge as an equilibrium.
Even when the cooperative outcome is the best for a
national fiscal authority, it is either not a Nash equilibrium or
only one of several Nash equilibriums. The monetary authority
may have an important coordinating role; however, the Paretopreferred
equilibrium will not necessarily involve cooperation.
JEL Code: E52, E61, E63.
Full article (PDF, 44 pages, 1186 kb)
Discussion by Paolo A. Pesenti
a University of Glasgow
c University of Porto