We speculate about how Europe's monetary union will evolve in the next five to ten years. We concentrate on what is likely to be the most important change in that period, namely, the increased number and heterogeneity of the participating states. New members will be sharply different from the...

This paper studies the impact of changes in the extent to which fiscal policy is distortionary on the short-run macroeconomic tradeoffs facing fiscal policymakers in an era of budget equilibrium. It does so in an open economy framework, that we use to interpret U.S.-European policy interactions....