The paper studies the effects of heterogeneity upon the monetary and fiscal-budgetary policy interactions in a Keynesian monetary union. As a result of interactions, some of our results contrast sharply with the ones in studies that consider separately monetary, fiscal and budgetary policies....

Extending Asensio's closed-economy framework (2005a,b) to a monetary union, we show that theprinciples of governance which emanate from the so called "New Consensus in Macroeconomics"(NCM), and therefore have been designed for presumed stationary regimes, may cause severedysfunctions, such as...