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The Precarious Fiscal Foundations of EMU

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After a brief overview of the fiscal theory of the price level, we consider the insights it provides into monetary policy formation under certain kinds of deflationary and inflationary stress. Then we consider how the institutions of the EMU are equipped – or unequipped – to deal with such stress. The conclusion is that fiscal institutions as yet unspecified will have to arise or be invented in order for EMU to be a long-term success.

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Sims, C.A. The Precarious Fiscal Foundations of EMU. De Economist 147, 415–436 (1999).

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