This paper considers how the "true" common monetary policy that is conducted by the ECB under various sources of uncertainty will differ from the policy that was agreed in the Maastricht Treaty, and how the uncertainties may induce a representative government to criticise the common monetary...

It is commonly thought that an open economy can accommodate output shocks through either exchange rate or real sector adjustments.We formalise this notion by incorporating labour market rigidities into an 'escape clause' model of currency crises.We show that the absence of structural reform...