Monetary and Fiscal Interactions in Open Economies
By G. Lombardo, Alan Sutherland. Social Science Research Network, 2004
119 citations recorded by the source corpus.
A two-country sticky-price model is used to analyse the interactions between fiscal and monetary policy. The role of an 'activist' fiscal policy as a stabilisation tool is considered and a measure of the welfare gains from international fiscal policy cooperation is derived. It is found that welfare gains from fiscal cooperation do exist provided monetary policy is set cooperatively. There are also welfare gains from fiscal policy cooperation in a monetary union. However, it is found that a 'non-activist' fiscal policy can be better than non-cooperative fiscal policy when the international correlation of shocks is strongly negative. And non-cooperative fiscal policy can be better than cooperative fiscal policy if monetary policy is not set cooperatively.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/aaab69f498947678bc0c1c9a797d011542ce3d47
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In Economics and Econometrics
- Tommaso Monacelli
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Citations in the corpus
- Optimal Monetary and Fiscal Policy in a Currency Union (2005, background): “For a recent analysis of monetary-fiscal policy interaction in a two-country setting and flexible exchange rates see Lombardo and Sutherland (2004).”