Non-Ricardian fiscal policies in an open monetary union
Javier Andrés, Fernando Ballabriga, Javier Vallés
Non-Ricardian fiscal policies in an open monetary union(463 kB)
The fiscal theory of the price level has challenged the conventional view of that monetary factors drive prices and exchange rates and has also provided a rationale for fiscal restrictions in a monetary union. This paper extends the main results of this theory in the context of an open monetary union model.
- First, it analyzes solutions to the indeterminacy of the exchange rate, some of which have non-standard macroeconomic implications
- Second, it shows in a calibrated model the consequences for the monetary union of fiscal misdirection in one of its members.
(European Economy. Economic Papers. 169. April 2002.
Brussels. 35pp. Tab. Free.)