The Monetary Union as a Whole:Absence of a Deficit Target -- Monetary Policy A -- Monetary Policy B -- Fiscal Policy A -- Fiscal Policy B -- Interaction between Central Bank and Government -- Cooperation between Central Bank and Government -- Interaction between Central Bank and Government:A Special Case -- The Monetary Union as a Whole:Presence of a Deficit Target -- Fiscal Policy A -- Fiscal Policy B -- Interaction between Central Bank and Government A -- Interaction between Central Bank and Government B -- Interaction between Central Bank and Government C -- Cooperation between Central Bank and Government -- The Monetary Union of Two Countries:Absence of a Deficit Target. -- Monetary Policy in Europe A -- Monetary Policy in Europe B -- Fiscal Policy in Germany A -- Fiscal Policy in Germany B -- Interaction between European Central Bank,German Government, and French Government -- Cooperation between European Central Bank,German Government, and French Government -- The Monetary Union of Two Countries:Presence of a Deficit Target -- Fiscal Policy in Germany A -- Fiscal Policy in Germany B -- Interaction between European Central Bank,German Government, and French Government A -- Interaction between European Central Bank,German Government, and French Government B -- Interaction between European Central Bank,German Government, and French Government C -- Cooperation between European Central Bank,German Government, and French Government -- Synopsis -- Conclusion -- Result.

This book studies the strategic policy interactions in a monetary union. The leading protagonists are the European Central Bank and national governments. The target of the ECB is low inflation in Europe. The targets of a national government are low unemployment and a low structural deficit. There are demand shocks, supply shocks, and mixed shocks. There are country-specific shocks and common shocks. This book develops a series of basic, intermediate, and more advanced models. Here the focus is on the Nash equilibrium. The key questions are: Given a shock, can policy interactions reduce the existing loss? And to what extent can they do so? Another topical issue is policy cooperation. To illustrate all of this there are a lot of numerical examples.