Contents: Preface -- Part I: Imperfect information, responses to shocks, and credibility issues -- 1. Introduction, Part 1 -- 2. A basic model and some early results -- 3. The strategy of monetary policy: Targets, instruments and information variables -- 4. A variable price level, supply shocks...

We examine monetary and fiscal interactions in a monetary union model with uncertainty due to imperfect central bank transparency. It is first shown that monetary uncertainty discourages excessive taxation and may thus reduce average inflation and output distortions. However, as countries enter...