Specificity of Fiscal Policy in the Monetary Union

  • Branka Topić-Pavković University of Banja Luka, Faculty of Economics, Banja Luka
Keywords: monetary integration, fiscal policy, convergence criteria, budget, public debt, fiscal discipline, European Monetary Union, asymmetric shocks


The condition of the optimal currency area as a theoretical basis of the monetary integration considers the harmonization of the fiscal and monetary policy crucial in achieving the efficient functioning of the monetary union. The issue of sustainability of the monetary union without fiscal union reaches real intensity in times of crisis and market instability. In that context, this paper focuses on the relation of uncoordinated fiscal policies and non-fulfillment of the fiscal criteria of convergence with the functioning and sustainability of the monetary union. The aim of this research is to establish whether, based on the analysed theoretical assumptions and empirical case, the fiscal criteria are respected in practice in the member countries, and how specificity of the fiscal policy influences the monetary integration especially in the years of crisis. We started research with the cost-benefit analysis of the monetary union pointing out to the specific costs and benefits occurring when a country joins the monetary union. We examined the fiscal parameters of the convergence criteria of the member states pointing to the problem of heterogeneity of members and deviations from the reference values of the Union. The results show that the metodology used to establish the set norms of the fiscal convergence cannot correspond symetrically to all member countries. The results also point to the fact that, unlike symmetrical, in the emergence of asymmetric shocks, i.e. disorders that affect various countries differently, membership in the monetary union becomes more expensive because of the inability to conduct monetary policy.


Download data is not yet available.


Alexopoulou, I., Bunda, I., & Ferrando, A. (2010). Determinants of government bond spreads in new EU countries. Eastern European Economics, 48(5), 5-37. https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1085.pdf

Baldwin, R.; Wyplosz, C. (2010). Ekonomija evropskih integracija. Beograd: Data Status.

Buiter, W. i Kletzer, K. (1990). Fiscal policy interdependence and efficiency. http://www.willembuiter.com/fpiew3328.pdf

De Grauwe, P. (2004). Ekonomija monetarne unije. Novi Sad: izdavačka knjižarnica Zorana Stojanovića.

De Grauwe P. (2012). Economics of Monetary Union. Oxford: Oxford University Press

Eichengreen, B.; Von Hagen, J. (1996). Fiscal Policy and Monetary Union: Is There a Tradeoff between Federalism and Budgetary Restrictions? http://www.nber.org/papers/w5517

Furtula, S. (2007). Kompatibilnost Centralne banke Srbije sa ECB. Časopis Bankarstvo broj 7, 2007, Beograd: Udruženje banaka Srbije

Hemming, R.; Murray P.A. (2002). Framework for Assessing Fiscal Vulnerability. http://www.imf.org/external/pubs/f/wp/2000/wp0052.pdf

Kenen, P. (1969).The Theory of Optimum Currency Areas: An Eclectic View.//Monetary Problems in the International Economy, ed. Robert Mundell and Alexander Swoboda, 41 54. Chicago: University of Chicago Press. URL: http://www.voxeu.org/article/kenen-euro

Lovrinović, I.; Ivanov, M. (2009). Monetarna politika. Zagreb: RRiF.

McKinnon, R. (2001). Optimum Currency Areas and the European Experience.//The European Bank for Reconstruction and Development. Economics of transition. 10. http://www.stanford.edu/~mckinnon/papers/optimumreveur.pdf

Mongelli, F. P. (2002). New views on the optimum currency area theory: What is EMU telling us? ECB, Working Paper No. 138.

Moesen, W.; Rompuy V. (1990). The Growth of Government Size and Fiscal decentralization paper presented at the 46th Annual Congress of the International Institute of IIPF Congress in Brussels

Mundell, A. R. (1961). A Theory of Optimum Currency Areas.//The American Economic Review, Volume 51. Issue 4. 657-665.URL: http://www.jstor.org/discover/10.2307/1812792&uid=3737568 &uid=2&uid=4&sid=21102271151101

Roubini, N. (2001). Debt Sustainability: How to Assess Whether a Country is Insolvent. http://www.people.stern.nyu.edu/ nroubini/ papers/debtsustainability.pdf

Vukmirica, V.; Špirić N. (2005). Ekonomska i monetarna integracija Evrope. Banja Luka: Ekonomski fakultet

How to Cite
Topić-Pavković, B. (2018). Specificity of Fiscal Policy in the Monetary Union. Acta Economica, 16(28), 97-120. https://doi.org/10.7251/ACE1828097T
Review article

Most read articles by the same author(s)

Obs.: This plugin requires at least one statistics/report plugin to be enabled. If your statistics plugins provide more than one metric then please also select a main metric on the admin's site settings page and/or on the journal manager's settings pages.