This paper studies the design, effects and interactions of monetary and fiscal policies in the euro-area and between the euro-area and the non euro-area. To do so, a stylized three-country model of monetary and fiscal policy rules is constructed. It is analyzed how monetary and fiscal rules...

Recent developments in macroeconomic policy, both in terms of theory and practice, have elevated monetary policy while fiscal policy has been downgraded. The latter is rarely mentioned in policy discussion, apart from arguing to place limits on budget deficits and fiscal variables. This paper...