We consider the political economy of a monetary union wheremember governments attempt to influence the policy of the commoncentral bank. Modeling this as a common agency with incentivecontracts, we show that if incentives are all that matters for the bank,the equilibrium implements a weighted...

We consider the political economy of a monetary union where member governments attempt to influence the policy of the common central bank. Modeling this as a common agency with incentive contracts, we show that if incentives are all that matters for the bank, the equilibrium implements a...

We consider monetary fiscal policy interactions in a monetary union. If monetary and fiscal authorities have different ideal output and inflation targets, the Nash equilibrium output or inflation or both are beyond the ideal points of all authorities. Leadership of either authority is better....