Abstract
There is now a rapidly growing literature dealing with the relationship between fiscal and monetary policies in complete or incomplete monetary unions.2 Much of this literature is a reaction to the Delors Report and to the Maastricht Treaty. The Report suggested and the Treaty institutionalized binding fiscal rules for monetary convergence. Since then these rules have been intensively debated. Many authors regard them as superfluous or as arbitrarily fixed.
We thank Rudiger Dornbusch, Jürgen von Hagen, Assaf Razin and other conference participants for helpful comments. Suggestions by Franz X. Hof were highly appreciated. We owe the subtitle to Mervyn King who introduced this twist to Sargent’s term ‘unpleasant monetarist arithmetic’ in King (1995)
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Winckler, G., Hochreiter, E., Brandner, P. (1998). Deficits, Debt and European Monetary Union: Some Unpleasant Fiscal Arithmetic. In: Calvo, G., King, M. (eds) The Debt Burden and its Consequences for Monetary Policy. International Economic Association Series. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-26077-5_10
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