ANALYSIS OF THE INTERACTION BETWEEN THE MONETARY AND FISCAL POLICY WITHIN THE ECONOMIC AND MONETARY UNION

The economic policy framework of Economic and Monetary Union (EMU) combines a supranational monetary policy conducted at the euro area level, with decentralised fiscal policies, which remain the responsibility of national governments. This lack of compliance calls into question the effectiveness of the EMU fiscal rules, and if has led to an intense debate, in academia, among the informed public and among policy-makers. In this paper, we want to provide some answers to, questions related to this debate: Why do we need fiscal rules in EMU? Are there costs associated with these rules? Are our rules sensible? And, finally, what can be done to improve their implementation?