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Operations Research Proceedings 2015 pp 563–568Cite as

Together We Are Strong—Divided Still Stronger? Strategic Aspects of a Fiscal Union

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Part of the book series: Operations Research Proceedings ((ORP))

Abstract

In this paper we present an application of dynamic tracking games to a monetary union. We use a small stylized nonlinear two-country macroeconomic model of a monetary union for analysing the interactions between two fiscal (governments) and one monetary (common central bank) policy makers. We introduce a negative asymmetric demand side shock describing the macroeconomic dynamics within a monetary union similar to the economic crisis (2007–2010) and the sovereign debt crisis (since 2010) in Europe. We investigate the welfare consequences of three scenarios: fiscal policies by independent governments (the present situation), centralized fiscal policy (a fiscal union) with an independent central bank, and a fully centralized fiscal and monetary union. For the latter two scenarios, we investigate the effects of different assumptions about the weights for the two governments in the cooperative agreement.

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References

  1. Blueschke, D., Neck, R., Behrens, D.A.: OPTGAME3: A dynamic game solver and an economic example. In: Krivan, V., Zaccour, G., (eds.) Advances in Dynamic Games. Theory, Applications, and Numerical Methods, pp. 29–51. Birkhäuser (2013)

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  2. Neck, R., Blueschke, D.: “Haircuts” for the EMU periphery: virtue or vice? Empirica 41(2), 153–175 (2014)

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Authors and Affiliations

  1. Alpen-Adria-Universität Klagenfurt, Klagenfurt, Austria

    D. Blueschke & R. Neck

Authors
  1. D. Blueschke
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  2. R. Neck
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Corresponding author

Correspondence to D. Blueschke .

Editor information

Editors and Affiliations

  1. Department of Business Administration, University of Vienna, Vienna, Austria

    Karl Franz Dörner

  2. Decision Sciences and Statistics (IDS) Department, ESSEC Business School of Paris, Cergy Pontoise Cedex, France

    Ivana Ljubic

  3. Department of Statistics and Operations Research, University of Vienna, Vienna, Austria

    Georg Pflug

  4. Operations Research and Control Systems, TU Wien, Vienna, Austria

    Gernot Tragler

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Blueschke, D., Neck, R. (2017). Together We Are Strong—Divided Still Stronger? Strategic Aspects of a Fiscal Union. In: Dörner, K., Ljubic, I., Pflug, G., Tragler, G. (eds) Operations Research Proceedings 2015. Operations Research Proceedings. Springer, Cham. https://doi.org/10.1007/978-3-319-42902-1_76

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