Yannis M. Ioannides

This paper emphasizes the importance of differences in population sizes in a general international equilibrium model of a monetary union under alternative scenaria of monetary, fiscal, and debt policy coordination.

It goes beyond Casella (1992) by allowing for coexistence of fiscal policy, national as well as union-wide (in the form of fiscal policy coordination at the supra-national level), along with monetary policy. It goes beyond Casella (1992) and Ioannides (2016; 2017) in examining the impact of market reforms and of various types of technological progress and explores their consequences for the sustainability of deficit spending and public debt.

It considers, in particular, conditions for participating in a fiscal union within a monetary union, a hitherto unexplored question. The paper allows for inefficiencies in tax collection that serves as another difference across countries and examines how union-wide coordination of tax and spending policy, typically a nation-specific competence, may improve welfare.

This is intended to explore the contrast between monetary policy outcomes determined by deliberations and voting in the cental bank, given the fiscal policy stance, and national fiscal policy interdependence, given union-wide monetary policy. It examines the implications of different sizes of the members of a currency union.

Yannis M. Ioannides, A Unified Framework for Studying Reforms, Deficits, and Debt in Fiscal and Currency Unions, CGK Working Paper no. 2019-08 (May 2019)