This article explores the policy and wealth consequences of alternative institutional arrangements through which fiscal policy interacts with monetary policy in a monetary union such as the EMU. The central issue of the article is the design of the appropriate monetary and fiscal institutions...

Using a theoretical model in which the degree of central bank independence affects the degree of inflation persistence and therefore the speed of disinflation, this paper suggests that sacrifice ratios are lower when central bank independence is higher. Empirical tests, using estimates of...