Lack of coordination between the monetary and fiscal authorities will result in inferior overall economic performance. This paper studies the interactions between monetary and fiscal policies and its effect on the economic performance by using al cointegration tests in the case of Euro Area....

Sovereign risk premia in several euro area countries have risen markedly since 2008, driving up credit spreads in the private sector as well. We propose a New Keynesian model of a two-region monetary union that accounts for this “sovereign risk channel.” The model is calibrated to the euro...