Monetary Policy Coordination, Credibility and Structural Asymmetries

The aim of this paper is to discuss the issue of monetary policy coordination in a framework where partners differ not because of idiosyncratic shocks but because of structural asymmetries affecting the conduct of national economic policies. These are introduced at the level of the country size of the economy. We then show that the chances of finding a mutually benefical coordination of the monetary policies which will take place under EMU between countries presenting large structural differences might be a source of tension among the partners for which the adoption of simple convergence rules or of insurance schemes constitutes no remedy.