On the desirability of fiscal constraints in a monetary union

No 330, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: The desirability of fiscal constraints in monetary unions depends critically on whether the monetary authority can commit to follow its policies. If it can commit, then debt constraints can only impose costs. If it cannot commit, then fiscal policy has a free-rider problem, and debt constraints may be desirable. This type of free-rider problem is new and arises only because of a time inconsistency problem.

Keywords: monetary unions; Fiscal policy (search for similar items in EconPapers)
Date: 2003
New Economics Papers: this item is included in nep-mac
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Working Paper: On the Desirability of Fiscal Constraints in a Monetary Union (2004)
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