We extend the model of Leith and Wren-Lewis (2000) to the case of a two-country monetary union, incorporating adaptive expectations. An asymmetry between the stabilisation properties of the two fiscal policies is introduced: only one country is fiscally-constrained by the dispositions of the...

Building on widespread criticisms of current EMU institutional arrangements, we sketch a reform proposal for EMU macroeconomic institutions. We advocate the adoption of targets for both monetary and fiscal policies, to be integrated by a system of checks and balances. As for fiscal policy,...