This paper examines economic policy interactions in the Economic and Monetary Union when the assessment of cyclical conditions in real time is surrounded by uncertainty. On the basis of a simple stylised model it shows that different views about the output gap on the side of the policy players -...

It is largely recognised that fiscal policy will have larger responsibilities for cyclical stabilisation in EMU given the loss of the monetary instrument. At the same time, the EMU's budgetary framework emphasises the need to rely on automatic fiscal stabilisers, rather than active policies in...