Publication: Quantitative easing rules as a means to achieve optimal levels of structural reforms and government deficits in a monetary union
Authors
Campoy MiƱarro, J. C. ; Negrete Mediavilla, J. C.
item.page.secondaryauthor
item.page.director
Publisher
publication.page.editor
publication.page.department
DOI
item.page.type
info:eu-repo/semantics/article
Description
Ā© 2023 The Authors. This document is made available under the CC-BY-NC 4.0 license http://creativecommons.org/licenses/by-nc /4.0/
This document is the Accepted version of a Published Work that appeared in final form in The World Economy. To access the final edited and published work see DOI: 10.1111/twec.13460
Abstract
This paper uses a tractable game theory model to study the interactions of structural reforms and fiscal and monetary policies in the European Monetary Union (EMU). Considering the externalities that arise when interest rates have hit the lower bound and monetary policy is carried out through quantitative easing (QE), we show that the subgame perfect equilibrium is suboptimal when structural reforms and fiscal policy are implemented at a national level. Then, we prove that the optimal outcome cannot be obtained if structural reforms are dictated by a supranational institution. By contrast, we establish that the first best can be obtained either by a full-fledged fiscal union or a rule on QE. Given the practical difficulties that the first of these two solutions have encountered in the EMU, a rule over QE provides a clear, easier and more credible way to make structural reforms and fiscal deficits achieve the levels that maximise the union's welfare.
publication.page.subject
Citation
The World Economy.Vol. 46, Issue 9 p. 2755-2779
item.page.embargo
Collections
Ir a EstadĆsticas
Este Ćtem estĆ” sujeto a una licencia Creative Commons. http://creativecommons.org/licenses/by-nc/4.0/