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- Title
Fiscal Neglect in a Monetary Union.
- Authors
Libich, Jan; Savage, James; Stehlík, Petr
- Abstract
The Duchy of Grand Fenwick, having satisfied all requirements of Eurozone accession, recently became its newest member. As the small dukedom has discontinued its use of the Fenwick Pound, its independent central bank has had its tasks relegated to the monitoring of the twelve banks that exist there, and no longer the exercising of monetary policy. Before joining the Eurozone, the Duchy's central bank had a hierarchical mandate, targeting low inflation, and subject to that the stability of unemployment. With a recent groundswell of popular opinion against the ruler, Duchess Gloriana XII, her government has sought to placate its subjects with free dental care, an increased state pension and subsidised wine. It can do this, now, in relatively safe knowledge the European Central Bank will not punish the Duchy's fiscal recklessness with higher interest rates - unlike the Duchy's independent central bank in the past.
- Subjects
EFFECT of inflation on the banking industry; CENTRAL banking industry; MONETARY policy; CURRENCY boards; DEMAND for money; MEDICAL care; PUBLIC opinion
- Publication
Economic Papers, 2010, Vol 29, Issue 3, p301
- ISSN
0812-0439
- Publication type
Article
- DOI
10.1111/j.1759-3441.2010.00074.x