Year of Graduation
Fiscal Limits and Monetary Policy in the EMU
The paper studies Fiscal Compact that entered into force in 2013 in the Euro area and sets different fiscal rules for countries with high and low level of debt. Building thee two-country model of the monetary union the author finds the incompatibility of fiscal rules adopted in the Euro area and problems with common monetary policy for countries with different cycles that are typical for countries under asymmetric fiscal rules. The paper also states that loses for both countries connected with fiscal consolidation can be lower in the case of less strict fiscal rule for highly indebted country.