One ‘Monetary Giant’ with Many ‘Fiscal Dwarfs’: The Efficiency of Macroeconomic Stabilization Policies in the European Monetary Union

摘要

One of the key problems in the design of a currency union is macroeconomic stabilization. Assuming that all policy-makers in the European Monetary Union are "disciplined" according to the rules set by the Maastricht Treaty and the Stability and Growth Pact, this paper addresses the question of whether member countries will effectively be sheltered against undesirable macroeconomic fluctuations. The analytical thrust of the paper is that having disciplined policy-makers does not exhaust the problem of policy design. Stabilization in the EMU may be pursued by means of centralized monetary policy as well as by means of national fiscal policies. Hence, the Tinbergen-Meade problem of efficient choice and assignment of stabilization instruments arises, a problem that has hitherto been disregarded. The main conclusion is that the now popular idea that the European Central Bank will cope with union-wide shocks while national governments will stabilize domestic shocks is not always the most efficient assignment choice, and it is inconsistent with the imposition of a fiscal deficit ceiling on member countries.