Fiscal Solvency and Price Level Determination in a Monetary Union

This paper applies the fiscal theory of price level determination to the case of a monetary union. A fiscal perspective suggests, first, that the focus of past studies on seigniorage, per se, may be misplaced. Second, a rise in the level of debt by one member government can raise the common price level throughout the union, suggesting a role for fiscal rules. Third, conditions are discussed under which fiscal solvency is not necessary for each member government in a monetary union