Abstract
The work provides a theoretical analysis of monetary policy and unification in light of today’s debate among academic economists on EMU. A brief survey of the main issues concerning monetary policy is presented. The author then puts the subject in a broader perspective, showing that central questions concerning the optimality of currency areas are strictly related to the theory of monetary policy and, particularly, to the effectiveness of domestic monetary actions. Since participation in a monetary union implies loss of monetary sovereignty, the issue at hand is evaluating the effects of this loss on social welfare. Hence, the author argues that federal fiscal policy can play a crucial role in the adjustment mechanism. JEL Codes: F15, E52 Keywords: Monetary policy, EMU, Monetary union, Economic integration
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