We analyze a two-country zone facing a joint inflationary shock and responding with coordinated and uncoordinated monetary and fiscal policies. We show that the standard presumption that the absence of coordination results in an excessive exchange rate appreciation of the zone with respect to...

What purpose does the European Monetary System serve? Who benefits from it? Is it a Deutschmark zone? Or could one argue that, despite the asymmetrical positions of France and Germany, the System does serve a certain collective interest? An attempt to answer these questions reveals a basic...