This book explores the scope and limits of macroeconomic policy in a
monetary union. The focus is on pure policies, policy mixes, and policy
coordination. The leading protagonists are the union central bank,
national governments, and national trade unions. Special emphasis is put
on wage shocks and wage restraint. This book develops a series of basic,
intennediate, and advanced models. A striking feature is the numerical
estimation of policy multipliers. A lot of diagrams serve to illustrate
the subject in hand. The monetary union is an open economy with high
capital mobility. The exchange rate between the monetary union and the
rest of the world is floating. The world interest rate can be exogenous
or endogenous. The union countries may differ in money demand,
consumption, imports, openness, or size. Previous versions of some parts
were presented at the Annual Conference of the Gennan Economic
Association and . at the Workshop on International Economics. I have
benefited from comments by Christopher Bliss, Volker Clausen, Johannes
Hackmann, Bernd Hayo, Jay H. Levin, Reinar Ludeke, Dirk Meyer, Jochen
Michaelis, Franco Reither, Gerhard Rubel, WolfScMfer, Michael Schmid,
Reinhard Selten, Hans-Werner Sinn, Sylvia Staudinger, Thomas Straubhaar,
Bas van Aarle, and Artur Woll. In addition, Michael Brauninger and
Michael Cyrus carefully discussed with me all parts of the manuscript.
Last but not least, Doris Ehrich did the secretarial work as excellently
as ever. I wish to thank all of them. Executive Summary 1) The monetary
union as a whole. First consider fiscal policy.
