Cover -- Contents -- List of Figures, Tables and Boxes -- Abbreviations -- Acknowledgements -- Introduction -- 1 History of Economic and Monetary Union -- From the Snake to the EMS -- Launching Monetary Union, 1999-2008 -- Crisis and Aftermath: Reconstructing EMU, 2008-present -- Conclusion -- 2 Monetary Integration -- Evolution EMU 1.0 -- Institutions -- Conclusion -- 3 The European Central Bank -- Institutional Configuration and Legal Mandates -- The ECB's Record -- Conclusion -- 4 Financial Integration and Banking Union -- Evolution -- Institutions -- External Dimension -- Conclusion -- 5 Fiscal Policy Coordination -- Evolution -- Instruments -- Conclusion -- 6 Economic Policy Coordination -- Evolution -- Institutions and Instruments -- Conclusion -- 7 The Euro Outs: A View from the Outside -- Becoming a Euro Insider -- Evolution -- The Euro Outsiders with Opt-outs -- Pre-euro Accession Countries -- Remaining in as an Out -- Conclusion -- 8 EMU and the World -- The Euro as an International Currency -- China and the Euro -- External Representation -- Conclusion -- Conclusion -- Bibliography -- Index.
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"This book, unlike other books, provides readers with a practical yet sophisticated grasp of the macroeconomic principles necessary to understand a monetary union. By definition, a monetary union is a group of countries that share a common currency. The most important case in point is the Euro area. Policy makers are the central bank, national governments, and national labour unions. Policy targets are price stability and full employment. Policy makers follow cold-turkey or gradualist strategies. Policy decisions are taken sequentially or simultaneously. The countries can differ in size or behaviour. Policy expectations are adaptive or rational. To illustrate all of this there are numerical simulations of monetary policy, fiscal policy, and wage policy."--Jacket
Introduction: European enlargement generally refers to the inclusion of new states into the European Union's Treaty area. This article considers instead the enlargement of Economic and Monetary Union into Africa. We know that no part of Africa is in the EU, though Morocco has sought to join, and the island of Mayotte belongs to an EU member state (France) and uses the euro. But the EU's single currency area is not identical with its monetary area. This article is about EMU beyond the EU itself, and in particular about the monetary shadow European colonial history has cast over western and central Africa. Here as well as in the Comoros islands three local currencies were long in the monetary area of France, and are now but local expressions of the euro. That was why in the late 1990s the impending introduction of the single European currency aroused considerable interest and some anxiety in those African countries that faced possible inclusion in the EU's monetary union. The question was whether the EC institutions should take over responsibly for monetary policy in the former French African overseas territories, although they are not in the EU now, and were never part of the EEC before independence. Alternatively, experts in Europe and in Africa considered whether France should maintain its monetary guarantee, and if so, whether the CFA franc should be decoupled from the future European currency. Finally, the CFA franc zones could simply disappear. Today currencies in the fourteen Francophone states plus those of two of Portugal's former African overseas countries are simply local variants of the euro. This paper briefly puts this strange situation in its historical context, considering what has changed and what has not with the changeover from the franc CFA pegged to the French franc, to a franc CFA pegged to the euro. I shall then ask, together with mainly African economists, political analysts and politicians, whether Africa's proxy euro zone should expand to take in perhaps the entire sub Saharan continent, which has a privileged trade and aid relationship with the EU. Alternatively, do Africans and Europeans see a European monetary zone in Africa as an opportunity or as an anachronistic burden? Do Africans within the zone want to remain tied to the EU to a degree that exists in no other sovereign states outside Europe? Two of the three CFA franc cum euro monetary zones have expanded both in nature and in geographical extent, having become economic unions and taken in two ex Portuguese dependencies. Do these now wish to form even larger units and turn themselves into regional common markets, with a common currency that in reality is not a currency at all, but only one or several local variants of the euro? How do other African states regard such ambitions? The answers to these questions require first a brief historical comment.
In monetary unions, monetary policy is typically made by delegates of the member countries. This procedure raises the possibility of strategic delegation—that countries may choose the types of delegates to influence outcomes in their favor. We show that without commitment in monetary policy, strategic delegation arises if and only if three conditions are met: shocks affecting individual countries are not perfectly correlated, risk‐sharing across countries is imperfect, and the Phillips curve is nonlinear. Moreover, inflation rates are inefficiently high. We argue that ways of solving the commitment problem, including the emphasis on price stability in the agreements constituting the European Union, are especially valuable when strategic delegation is a problem.
Europe's financial crisis cannot be blamed on the Euro, Harold James contends in this probing exploration of the whys, whens, whos, and what-ifs of European monetary union. The current crisis goes deeper, to a series of problems that were debated but not resolved at the time of the Euro's invention. Since the 1960s, Europeans had been looking for a way to address two conundrums simultaneously: the dollar's privileged position in the international monetary system, and Germany's persistent current account surpluses in Europe. The Euro was created under a politically independent central bank to meet the primary goal of price stability. But while the monetary side of union was clearly conceived, other prerequisites of stability were beyond the reach of technocratic central bankers. Issues such as fiscal rules and Europe-wide banking supervision and regulation were thoroughly discussed during planning in the late 1980s and 1990s, but remained in the hands of member states. That omission proved to be a cause of crisis decades later. Here is an account that helps readers understand the European monetary crisis in depth, by tracing behind-the-scenes negotiations using an array of sources unavailable until now, notably from the European Community's Committee of Central Bank Governors and the Delors Committee of 1988-89, which set out the plan for how Europe could reach its goal of monetary union. As this foundational study makes clear, it was the constant friction between politicians and technocrats that shaped the Euro. And, Euro or no Euro, this clash will continue into the future.
The purpose of this article is to provide a political economy rationale that helps explain why some non-central European economies, featuring highly idiosyncratic disturbances and apparently low inflation bias inefficiencies, seem so eager to enter the European Monetary Union (EMU). The main message from the paper is that because these economies normally display a high degree of domestic political uncertainty, the "economic costs" arising from the decision to surrender monetary policy may in fact be less severe than the "political costs" of opting out of EMU and then possibly facing undesired inflation upsurges in the future. ; O objetivo deste artigo é sugerir um argumento de economia política que ajude a explicar porque alguns países periféricos da Europa, que apresentam choques econômicos altamente idiossincráticos, e que conseguiram controlar o problema do viés inflacionário recentemente, apresentam elevado desejo de ingressar na União Monetária Européia. A principal mensagem do artigo é que, devido ao elevado grau de incerteza e polaridade política presentes nestas economias, os "custos econômicos" de se delegar hoje a política monetária a um agente externo, podem se mostrar menores que os "custos políticos" de não adesão caso um governo com preferências inflacionárias mais amenas venha a vencer as eleições futuras.
In the decade since its creation in 1999, the European Economic and Monetary Union (EMU) has experienced surprisingly large and persistent inflation differentials across member states causing substantial shifts in relative price levels. At the same time, member countries exhibited distinct non-synchronized output fluctuations, giving rise to a pattern of 'rotating slumps' (a term coined by Olivier Blanchard). This paper presents a stylized theoretical model of a monetary union which demonstrates how inflation differentials and relative output movements interact dynamically. A number of implications are derived from the model. In particular, national fiscal policies are shown to have an important role in containing internal macroeconomic disparities in a monetary union. An optimal fiscal policy rule is derived from the model for that purpose.
