Beetsma, Roel; Bovenberg, A Lans - C.E.P.R. Discussion Papers - 1998
the monetary authorities are not able to commit. With international risk-sharing in a fiscal union, fiscal discipline … suffers from moral hazard. An inflation target alleviates the inflation bias but weakens fiscal discipline. In a monetary … union, however, this adverse effect on fiscal discipline is weaker. This advantage of monetary unification may outweigh the …