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Will Fiscal Policy Be Effective Under EMU?


  • M. Cangiano
  • Eric Mottu


European Economic and Monetary Union does not envisage creating a central fiscal authority. Monetary and exchange rate policies will be centralized, but fiscal policy will remain a national responsibility, in line with the subsidiarity principle. This paper argues that monetary union will generate pressures for closer economic integration than currently envisaged. Although not a necessity, a more active central role could then be justified on the grounds of allocative efficiency, redistribution, and stabilization. While in the short term enhanced policy coordination may address those pressures satisfactorily, as economic integration proceeds, the case for a central fiscal authority may become stronger.

Suggested Citation

  • M. Cangiano & Eric Mottu, 1998. "Will Fiscal Policy Be Effective Under EMU?," IMF Working Papers 98/176, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:98/176

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    References listed on IDEAS

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    Cited by:

    1. F. Javier Salinas, 2002. "Accrual Budgeting And Fiscal Consolidation In The Emu," Contemporary Economic Policy, Western Economic Association International, vol. 20(2), pages 193-206, April.
    2. Janno Reiljan & Kadi Timpmann & Katrin Olenko, 2003. "Key Issues In Developing The Public Administration System Of Estonia Before Joining The European Union," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 17, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    3. Michael D. Bordo & Lars Jonung, 1999. "The Future of EMU: What Does the History of Monetary Unions Tell Us?," NBER Working Papers 7365, National Bureau of Economic Research, Inc.
    4. Davide Furceri, 2002. "Risk-sharing e architettura istituzionale delle politiche di stabilizzazione nell'UME: aspetti metodologici e verifica empirica," Rivista di Politica Economica, SIPI Spa, vol. 92(6), pages 175-210, November-.
    5. Konrad Szelag, 2008. "A Single Fiscal Policy in the Euro Area: Vision or Utopia?," NBP Working Papers 46, Narodowy Bank Polski, Economic Research Department.


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