Macroeconomic Stabilization Policies in the Emu: Spillovers, Asymmetries, and Institutions

38 Pages Posted: 14 Jan 2005

See all articles by Joseph Plasmans

Joseph Plasmans

University of Antwerp - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Tilburg University

Giovanni Di Bartolomeo

Sapienza University of Rome, Department of Economics and Law

Jacob C. Engwerda

retiree

Bas Van Aarle

Leuven Centre for Irish Studies LCIS; CESifo (Center for Economic Studies and Ifo Institute); Radboud University Nijmegen - Department of Economics

Tomasz Michalak

University of Antwerp - Department of Economics

Date Written: January 2005

Abstract

This paper studies the institutional design of the coordination of macroeconomic stabilization policies within a monetary union in the framework of linear quadratic differential games. A central role in the analysis plays the partitioned game approach of the endogenous coalition formation literature. The specific policy recommendations in the EMU context depend on the particular characteristics of the shocks and the economic structure. In the case of a common shock, fiscal coordination or full policy coordination is desirable. When asymmetric shocks are considered, fiscal coordination improves the performance but full policy coordination doesn't produce further gains in policymakers' welfare.

Keywords: Macroeconomic stabilization, EMU, coalition formation, linear quadratic differential games

JEL Classification: C70, E17, E58, E61, E63

Suggested Citation

Plasmans, Joseph E. J. and Di Bartolomeo, Giovanni and Engwerda, Jacob C. and van Aarle, Bas and Michalak, Tomasz, Macroeconomic Stabilization Policies in the Emu: Spillovers, Asymmetries, and Institutions (January 2005). Available at SSRN: https://ssrn.com/abstract=648501 or http://dx.doi.org/10.2139/ssrn.648501

Joseph E. J. Plasmans (Contact Author)

University of Antwerp - Department of Economics ( email )

Prinsstraat 13
Antwerp, B-2000
Belgium

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Tilburg University

Postbus 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

Giovanni Di Bartolomeo

Sapienza University of Rome, Department of Economics and Law ( email )

via Castro del Laurenziano 9
Roma, IA Rome 00191
Italy

Jacob C. Engwerda

retiree ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2174 (Phone)
+31 13 466 3280 (Fax)

Bas Van Aarle

Leuven Centre for Irish Studies LCIS ( email )

Janseniusstraat 1
Leuven, 3000
Belgium
+32 16 310433 (Phone)
+32 16 310431 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

Radboud University Nijmegen - Department of Economics ( email )

P.O.Box 9108
6500 HK Nijmegen
Netherlands
+31 24 3616172 (Phone)
+31 24 3611846 (Fax)

Tomasz Michalak

University of Antwerp - Department of Economics ( email )

Prinsstraat 13
Antwerp, B-2000
Belgium

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