This paper outlines some issues regarding the interaction of independent fiscal authorities and one central bank in the European monetary union.It points out the possibilities for coordination failures,ranging everywhere from potentially excessive deficits and free-riding problems to...

If discretionary monetary policy implies an inflation bias, monetary unification boosts the accumulation of public debt. The additional debt accumulation is welfare reducing only if governments are sufficiently myopic. In the presence of myopic governments, debt ceilings play a useful role in...