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Fiscal Policy In A Monetary Union: Gains From Changing Institutions

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Executive Summary

In a Monetary Union where individual monetary instruments are lost, fiscal policy becomes more important as a national policy. The question addressed in this paper is whether fiscal policy should be decided at the country level or by a central decision maker, being in any case the fiscal instruments specific to each country. To answer this question, the focus is on the quantitative effect, since there are costs of implementing a supranational decision maker. While discussing the methodologies used in literature, the authors hereby propose a different one for quantifying gains from cooperation.

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