Edited by Patrick Artus, André Cartapanis and Florence Legros
Chapter 12: Comparing Monetary and Fiscal Policies in Europe and in the United States: A Strategic Analysis
12. Comparing monetary and ﬁscal policies in Europe and in the United States: a strategic analysis Pierre Faure INTRODUCTION According to some economists (Emerson et al., 1990), monetary uniﬁcation in Europe should facilitate dialogue and cooperation with the rest of the world. Some others think on the contrary that the launch of the euro is likely to complicate international macroeconomic policy coordination (Goodhart, 1993; Kenen, 1993; Begg et al., 1997). The optimistic point of view in Emerson et al. (1990) mainly rests on the idea that the European currency union is likely to increase the costs of non-cooperative behaviour for the United States, because of the removal of the asymmetry linked to the small size and high degree of openness of European economies. The other countries should be more aware of those costs and therefore take into account the spillovers of their policies. We think however that the analysis in the Emerson report oversimpliﬁes many things, especially because it considers the European Monetary Union (EMU) as representing a single actor and, in this way, supposes the appearance of a G4 at the international level. It is true that the ﬁnance ministers agreed in 1998 upon a three-handed representation mode in the G8 meetings. But such a simpliﬁcation does not make sense from a ﬁscal point of view (see in particular Goodhart, 1993). No treaty ensures the coordination of national ﬁscal policies or their consistency with the monetary strategy of the European Central Bank (ECB). In view of...
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