The article discusses how monetary policy and fiscal policy can create problems in a currency union like the EMU. When dealing with different types of economic shocks, fiscal policy may not always be effective in stabilizing the economy. The study shows that fiscal policy tends to be too counter-cyclical for some shocks and not counter-cyclical enough for others. The number of decision makers involved in fiscal policy also affects its effectiveness. Overall, the cost of not coordinating fiscal policies is higher for certain types of economic shocks.