The EMU is an highly integrated economic area where externalities occur. Therefore, in this context interaction of monetary and fiscal policies is a crucial issue. This paper focuses on how coalitions among policy-makers are formed and what are their effects on the stabilization of output and...

This paper studies the institutional design of the coordination of macroeconomic stabilization policies within a monetary union in the framework of linear quadratic differential games. A central role in the analysis plays the partitioned game approach of the endogenous coalition formation...