Economics, Econometrics and Finance
4 years ago

Fiscal policies in one country affect wages and interest rates globally.

Insulation Impossible: Fiscal Spillovers in a Monetary Union
Russell Cooper, Hubert Kempf, Dan Peled

Paper Summary

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The article explores how the fiscal policies of different countries in a monetary union affect wages and interest rates. The researchers found that no monetary policy rule can completely shield one region from the fiscal policies of another. Some rules, like fixing interest rates, can offer partial protection.