The stability Pact and the coordination of fiscal policies in the EMU

This paper studies the relationship between the Stability and Growth Pact (SGP) and the
coordination of fiscal policies in the EMU. Results show that the coordination is an efficient
tool to increase EMU stabilization, even though the overall impact greatly varies according to
the nature of the shock that occurs. Fiscal coordination appears to be compatible with the
SGP and coordination gains can actually be enhanced with the SGP. Nethertheless, results
are closely related to the effects of monetary and fiscal policies on output.