In this paper we analyze the issue of cooperation among national fiscal authorities in a monetary union within the framework of their strategic interactions with the common monetary authority. We find that: a) in the lack of cooperation with the central bank, cooperation among fiscal authorities is not desirable; b) if the authorities have different targets, both fiscal leadership and monetary leadership result in a Pareto improvement with respect to the Nash outcome; however, the central bank is better off acting as a follower rather than as a leader; c) harmonization of targets makes policy coordination unnecessary, unless countries are hit by asymmetric shocks: in this case, either cooperation among national fiscal authorities or state-contingency of targets are necessary to obtain an efficient outcome. These findings are applied to the EMU case. Keywords: Fiscal and Monetary Policy Coordination, Monetary Union, International Fiscal Issues JEL Classification: E61, F42, H87
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