I will discuss four different forms of economic policy co-ordination in EMU which all require different intensities of co-ordination: i) fiscal policy co-ordination among EU member countries, ii) the mix of fiscal and monetary policy, iii) the implementation of exchange rate policies, and iv) the co-ordination of labour market policies. The implementation of exchange rate policy in EMU is perhaps the odd one out.
Because national markets have become more open to international trade, domestic firms and workers face more competition and have less market power than in the past. This development could help to account for any reduced sensitivity of U.S. inflation to domestic resource utilization.