On the Benefits of Fiscal Policy Coordination in a Currency Union: A Note

It is quite often claimed by politicians that a common currency makes it beneficial to be also endowed with a common fiscal policy. However, if fiscal policy can reasonably be considered to be a source of shocks, national fiscal policies which are steered independently from each other are generally preferable because they allow the possibility to diversify macroeconomic risks. Abstracting from automatic stabilisers, this view is valid independent on whether the ECB targets money growth or interest rates.