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 language | English |
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Pages (from-to) | 319-335 |
Journal | Empirica |
Volume | 26 |
Issue number | 4 |
DOIs | |
Publication status | Published - 1999 |