The paper studies the interaction between the monetary and fiscal authorities in the Euro area and the block of outside countries during the Third Stage of EMU. Restraints on fiscal policies and outside monetary policy are introduced as utility costs related to the use of the tax instruments...

Policy mix problems may arise in a monetary union with centralized monetary policy and decentralized fiscal policy. A consequence of this may be an inappropriate stabilization of shocks. This paper addresses how policy coordination problems are affected by the objectives of the monetary...

So far, the "new open economy macroeconomics" literature has primarily focused on monetary policy and monetary policy rules, rather than paying attention also to fiscal policy. This is an omission because, especially with the advent of EMU, the burden on fiscal policy as an instrument for...