European monetary and fiscal policies after the EU enlargement

Reinhard Neck, Gottfried Haber, Warwick McKibbin

    Research output: Contribution to journalArticle

    Abstract

    This paper examines the design of macroeconomic policies after Central and Eastern European countries (CEECs) have joined the EU. We consider scenarios with and without CEECs being members of the European Economic and Monetary Union (EMU) and analyze consequences of different intermediate targets for the European Central Bank. For the fiscal policy variables, we assume that the governments of incumbent and new members either refrain from pursuing active stabilization policies or follow either non-cooperative or cooperative activist fiscal policies. Different scenarios are simulated with the macroeconomic McKibbin-Sachs Model (MSG2 Model), and the resulting welfare orderings are determined. They show that the advantages and disadvantages of different policy arrangements depend strongly on the nature of the shock the economies are faced with. Additional macroeconomic noise resulting from the CEECs' membership of the EMU does not seem to be too much of a problem.
    Original languageEnglish
    Pages (from-to)229-245
    JournalEmpirica
    Volume31
    DOIs
    Publication statusPublished - 2004

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