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Optimal Monetary and Fiscal Policy in a Currency Union
Social Science Research Network
We lay out a tractable model for ...scal and monetary policy analysis in a currency union, and study its implications for the optimal design of such policies. Monetary policy is conducted by a common central bank, which sets the interest rate for the union as a whole. Fiscal policy is implemented at the country level, through the choice of government spending. The model incorporates country-speci...c shocks and nominal rigidities. Under our assumptions, the optimal policy requires that indoi:10.2139/ssrn.871037 fatcat:5dd7blsbe5eotb4xopgjak3hsq