However, the absence of a national monetary policy conducted at the national level also magnifies the importance of what I would call a “passive” form of fiscal policy, based on the free play of automatic fiscal stabilisers.
The reliance on automatic stabilisers - basically unemployment expenditure and taxes - would in general be preferable to a more active fiscal policy, because they have a more immediate impact on aggregate demand. In addition, unlike most discretionary policies, they do not have a persistent effect on fiscal variables, since they are reversed as soon as economic conditions change.