On the need for fiscal constraints in a monetary union

V. V. Chari; Patrick J. Kehoe

doi:10.1016/j.jmoneco.2007.06.032

On the need for fiscal constraints in a monetary union

V. V. Chari, Patrick J. Kehoe

Economics (Twin Cities)

Research output: Contribution to journal › Article › peer-review

59 Scopus citations

Abstract

The desirability of fiscal constraints in monetary unions depends critically on whether the monetary authority can commit to following 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.

Original language	English (US)
Pages (from-to)	2399-2408
Number of pages	10
Journal	Journal of Monetary Economics
Volume	54
Issue number	8
DOIs	https://doi.org/10.1016/j.jmoneco.2007.06.032
State	Published - Nov 2007

Bibliographical note

Funding Information:
We thank Kathy Rolfe and Joan Gieseke for excellent editorial assistance and the National Science Foundation for financial support. The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System.

Keywords

Free riding problem
Growth and stability pact
International cooperation
Time inconsistency

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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On the need for fiscal constraints in a monetary union

Abstract

Bibliographical note

Keywords

UN SDGs

Access

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