Tesis doctoral de Anna Lipinska
My phd dissertation concentrates on the theoretical analysis of the way monetary and fiscal policies should be conducted in the european monetary union (emu) accession countries. Despite diverse macroeconomic experience and structural differences these economies share common characteristics: they are small open economies with rapid productivity growth, infrastructure improvements and are vulnerable to external disturbances. Importantly their fiscal and monetary policies are requires to stabilize their economies in accordance with the membership requirements of the emu summarized in the maastricht treaty. In reality, we observe that the choice of monetary and fiscal policies and also the progress in economic stabilization differ substantially between the accession countries. That said, many of the emu accession countries do not satisfy at the moment some of the maastricht convergence criteria. My interest lies in identifying the implications of different monetary and fiscal policies on the compliance with the maastricht criteria. I investigate whether structural differences can affect monetary choices. I characterize the optimal monetary policy and also optimal interaction between monetary and fiscal policy in the emu accession countries. Finally, i study how the maastricht criteria affect the design of optimal policies and their ability to stabilize business cycle fluctuations. In order to address all these issues i take advantage of the new open macroeconomics literature. In particular i perform the whole analysis in the framework of dynamic stochastic general equilibrium model of a small open economy incorporating frictions such as price stickiness and distortionary taxation, which provide a role for monetary and fiscal policy. As far as the structure of the economy is concerned i introduce two goods sectors: nontradable goods and tradable goods. I take into account recent empirical literature, both on oecd and emu accession countries, that highlights the role of sector specific shocks in explaining international business cycle fluctuations (see e.G. Canzoneri et al. (1999), marimon and zilibotti (1998) and mihaljek and klau (2004)). The model can be seen as an extension of the one-sector small open economy model developed by de paoli (2004). It is also similar in its structure to the two-country models of altissimo et al (2004), benigno and thoenisen (2003) and liu and pappa (2005). Finally, the model aims at incorporating important characteristics of the emu accession countries: productivity growth, diverse degrees of exchange rate pass through and a volatile stochastic environment. The model is calibrated to match the moments of a chosen emu accession country, i.E. The czech republic. In chapter 1 i study the ability of different monetary regimes to satisfy the maastricht convergence criteria. I analyze regimes that reflect the policy choices observed in the emu accession countries, i.E. A peg regime, a managed float and a flexible exchange rate regime with cpi inflation targeting. In particular, i study responses of the maastricht variables (i.E. Cpi inflation, nominal interest and nominal exchange rate) under different regimes to both domestic supply and demand shocks and also external shocks. I discuss the implications of openness, trade specialization pattern and the degree of exchange rate pass through on the choice of the monetary regime that would satisfy the maastricht criteria. Importantly, i provide a quantitative framework to evaluate whether a given monetary regime can satisfy the maastricht criteria. I find that there exists a significant trade-off between compliance with the cpi inflation criterion and the nominal interest rate criterion. Under the benchmark parameterization none of the regimes satisfies all the criteria. The sensitivity analysis reveals that the probability that some of the regimes will satisfy all the criteria increases with openness of the economy and degree of substitution between home and foreign traded goods. However the ultimate choice of the regime which satisfies all the criteria depends on the degree of exchange rate-pass through. Low degree of pass through discriminates between regimes: when the economy gets more open, variances of the maastricht variables under the peg and managed float regime diminish while the contrary is true for the cpi targeting regime. If degree of exchange rate pass through is high, then higher openness enables all the regimes to meet the maastricht criteria. Chapter 2 focuses on characterization of optimal monetary policy for emu accession countries in the framework of the already developed model. I also investigate how the monetary maastricht criteria affect the optimal monetary policy. First, i characterize the optimal monetary policy from a timeless perspective (woodford (2003)). I derive the micro founded loss function using the second order approximation methodology developed by rotemberg and woodford (1997) and benigno and woodford (2005). The derived loss function can be seen as a generalization of the previous studies encompassing both the closed (aoki (2001), benigno (2004), rotemberg and woodford (1997)) and open economy frameworks (gali and monacelli (2005) and de paoli (2004)). I find that the optimal monetary policy in a two-sector small open economy should not only target inflation rates in the domestic sectors and aggregate output fluctuations, but also domestic and international terms of trade. In order to characterize the optimal monetary policy constrained by the monetary maastricht criteria i reformulate the criteria using the methodology developed by rotemberg and woodford (1997, 1999) for the analysis of the zero bound problem of the nominal interest rate. The optimal constrained policy differs in two aspects from the optimal unconstrained policy (stabilization and deterministic components): it restricts fluctuations of the maastricht variables and also sets new deterministic targets for these variables that serve as additional buffers to comply with the criteria. Under the chosen parameterization optimal monetary policy does not satisfy the cpi inflation and the nominal interest rate criteria. The optimal constrained policy induces smaller variability of the cpi inflation and of the nominal interest rate. At the same, it is also characterized by a deflationary bias which results in targeting cpi inflation rate and nominal interest rate that are 0.7% p.A. Lower than their equivalents in the reference countries. As a result, such a policy induces additional welfare costs that amount to 30% of the initial deadweight loss of the optimal unconstrained policy. While the first two chapters focus on monetary policy issues in the emu accession countries, fiscal requirements set out in the maastricht treaty (as a part of the stability and growth pact) indicate that fiscal policy in these countries could be also constrained. That said, in chapter 3 i incorporate fiscal policy by endogenizing tax and debt decisions and restricting taxes to only distortionary ones. Bearing in mind that monetary policy in the emu accession countries is constrained by the maastricht criteria, i investigate whether fiscal policy can serve as an additional stabilization tool and how its ability to stabilize business cycles changes when it is subject to the fiscal maastricht criteria. In general, i analyze the properties of the optimal monetary and fiscal policy constrained by the maastricht criteria and the stability and growth pact (sgp) requirements. Additionally, i study the relative importance of monetary and fiscal criteria in shaping the stabilization pattern of the constrained policy. I find that targets of the unconstrained optimal monetary and fiscal policy are similar to those of the optimal monetary policy alone. Similarly to the findings of chapter 2, the constrained policy not only restricts fluctuations of the maastricht variables but creates an additional buffer through new deterministic targets of the maastricht variables. Under the chosen parameterization, the optimal monetary and fiscal policy violate three maastricht criteria: on the cpi inflation rate, the nominal interest rate and deficit to gdp ratio. Since monetary criteria play a dominant role in affecting the stabilization process of the constrained policy, cpi inflation and the nominal interest rate are characterized by a smaller variability (than under the unconstrained policy) at the expense of a higher variability of deficit to gdp ratio. The constrained policy is characterized by a deflationary bias which results in targeting the cpi inflation rate and the nominal interest rate that are lower by 1.3% p.A. Than their equivalents in the countries taken as a reference. The constrained policy is also characterized by targeting surplus to gdp ratio at around 3.7%. As a result the policy constrained by the maastricht criteria induces additional welfare costs that amount to 60% of the initial deadweight loss associated with the optimal policy. Summing up, maastricht criteria have a significant effect on the way monetary and fiscal policies should be conducted in the emu accession countries. They induce serious trade-offs for policymakers (as it is analyzed in chapter 1). Based on the analysis undertaken in chapters 2 and 3, i draw the following policy recommendation: in order to satisfy the maastricht criteria policymakers should reconsider both the stabilization and deterministic component of the monetary and fiscal policy.
Datos académicos de la tesis doctoral «The maastricht convergence criteria and monetan y and fiscal policies for the european monetary union accession countries«
- Título de la tesis: The maastricht convergence criteria and monetan y and fiscal policies for the european monetary union accession countries
- Autor: Anna Lipinska
- Universidad: Autónoma de barcelona
- Fecha de lectura de la tesis: 09/10/2008
Dirección y tribunal
- Director de la tesis
- Kosuke Aoki
- Tribunal
- Presidente del tribunal: pierpacio Benigno
- daniela Iorio (vocal)
- stefano Gnocchi (vocal)
- alessandra Bonfiglioli (vocal)