Query:
faculty: "FEB" and publication year: "1999"
| Authors | R.M.W.J. Beetsma, A.L. Bovenberg | | Title | Does monetary unification lead to excessive debt accumulation? |
| Journal | Journal of Public Economics |
| Volume | 74 |
| Year | 1999 |
| Issue | 3 |
| Pages | 299-325 |
| ISSN | 0047-2727 |
| Faculty | Faculty of Economics and Business |
| Institute/dept. | FEB: Research Institute in Economics and Econometrics Amsterdam (RESAM) |
| Keywords | Common central bank; Monetary union; Credibility effect; Government myopia; Price-stability weight |
| Classification | E52; E58; E61; E62 |
| Abstract | If discretionary monetary policy gives rise to an inflation bias, monetary unification boosts the accumulation of public debt. The additional debt accumulation harms welfare if governments are sufficiently myopic. In the presence of myopic governments, debt ceilings play a useful role in avoiding excessive debt accumulation in a monetary union and allowing a conservative, independent central bank to focus on price stability. With supply shocks, monetary unification results in excessive variability of public debt. A debt target that constrains stabilization policy helps to prevent this. |
| Document type | Article |
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