Macroeconomic policy design in the European monetary union: A numerical game approach

Reinhard Neck, Gottfried Haber, Warwick McKibbin

    Research output: Contribution to journalArticle

    Abstract

    Optimal economic reactions of European policy-makers on exogenous shocks are de-termined by simulating a global macroeconomic model under different institutional arrangements. Inparticular, it is investigated whether discretionary or rule-based policies and whether non-cooperativeor cooperative policies for Europe result in a better performance as measured by intertemporal ob-jective functions. The results show that the answers to these questions depend strongly on the natureof the shock to which European economies are exposed. For a negative supply shock, rule-basedpolicies dominate, whereas for a negative demand shock, cooperative fiscal policy-making withinthe European Monetary Union gives the best results.
    Original languageEnglish
    Pages (from-to)319-335
    JournalEmpirica
    Volume26
    Issue number4
    DOIs
    Publication statusPublished - 1999

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