Designing fiscal and monetary institutions for a European Monetary Union

This paper explores the conditions under which a European Monetary Union (E MU) is an optimum currency area. The scope for an EMU increases with the co nvergence of structural and fiscal policies, small money holdings, a conser vative European Central Bank, and dependent national central banks. How nat ional policies affect the rest of the union once the EMU has been establish ed is also investigated. The case for surveillance of national structural a nd fiscal policies appears to depend mainly on the monetary arrangements in the union.