TY  - JOUR
AU  - Chari,V.V.
AU  - Kehoe,Patrick J.
TI  - On the Desirability of Fiscal Constraints in a Monetary Union
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10232
PY  - 2004
Y2  - January 2004
UR  - http://www.nber.org/papers/w10232
L1  - http://www.nber.org/papers/w10232.pdf
N1  - Author contact info:
Varadarajan V. Chari
Department of Economics
University of Minnesota
1035 Heller Hall
271 - 19th Avenue South
Minneapolis, MN 55455
Tel: 612/626-5171
Fax: (612) 624-0209
E-Mail: varadarajanvchari@gmail.com

Patrick Kehoe
Research Department
Federal Reserve Bank of Minneapolis
90 Hennepin Avenue
Minneapolis, MN  55480-0291
Tel: 612/204-5525
Fax: 612/204-5515
E-Mail: pkehoe@res.mpls.frb.fed.us
AB  - The desirability of fiscal constraints in monetary unions depends critically on whether the monetary authority can commit to follow its policies. If it can commit, then debt constraints can only impose costs. If it cannot commit, then fiscal policy has a free-rider problem, and debt constraints may be desirable.  This type of free-rider problem is new and arises only because of a time inconsistency problem.
ER  -