A.L. Bovenberg

Designing Fiscal and Monetary Institutions for a European Monetary Union

This paper explores the conditions under which aEuropean Monetary Union (EMU) is an optimum currencyarea. The scope for an EMU increases with theconvergence of structural and fiscal policies, smallmoney holdings, a conservative European Central Bank,and dependent national central banks. How nationalpolicies affect the rest of the union once the EMU hasbeen established is also investigated. The case forsurveillance of national structural and fiscalpolicies appears to depend mainly on the monetaryarrangements in the union.