MONETARY-POLICY IN AN EMERGING EUROPEAN ECONOMIC AND MONETARY UNION -KEY ISSUES

Key issues relating to the design and implementation of monetary polic y in an emerging European economic and monetary union are discussed, a lthough specific institutional proposals for transition to EMU are nei ther endorsed nor dismissed. The goals of monetary policy are examined in the context of the interrelationships among price stability, curre nt account equilibrium, and exchange rate stability. Issues addressed relevant to the implementation of monetary policy include coordination versus autonomy, rules versus discretion, and the role of sterilized official intervention. Finally, the importance of fiscal discipline is emphasized, and several alternative mechanisms for encouraging it are evaluated.