Fiscal Constraints of a Fixed Exchange Rate Regime

Preprint
Publisher Website
Google Scholar
    • preprint
      • Published in RePEc
Abstract
The paper considers whether the implementation of a fixed exchange rate regime requires or implies binding constraints on fiscal policy. The main conclusions are that, from a country perspective, the effective constraint is on the degree of monetary financing, which bears an uncertain relationship to the size of the budget deficit; that, from a systemic perspective, the financial stability of the currency area can be ensured by making the monetary and fiscal authorities independent of one another; and that the case for coordination of fiscal policies—whatever its merits—is not enhanced by the creation of a fixed exchange rate regime.
All Related Versions

This publication has 0 references indexed in Scilit: