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In this paper, the capital market relations between the Euro area and the USA are subject to investigation. Formally based on the uncovered interest rate parity (UIP), first a longrun equilibrium between Euro and US government bond yields is established in backward recursively estimated vector error correction models (VECMs). Subsequently, the focus lies on interest rate leadership and adjustment as well as capital market integration. One major finding shows, that the foundation of the European Monetary Union (EMU) strengthened its role relative to the USA. Furthermore, the transatlantic connections have become closer in the course time.

The paper studies theoretical and empirical location dispersion of exchange rate arrangements - rigid-intermediate-flexible regimes, in the context of extreme arrangements of a currency board, dollarization and monetary union moderate characteristics of intermediate arrangements (adjustable pegs crawling pegs and target zones) and imperative-process "normalization" in the form of a managed or clean floating system. It is established that de iure and de facto classifications generate "fear of floating" and "fear of pegging". The "impossible trinity" under the conditions of capital liberalization and globalization creates a bipolar view or hypothesis of vanishing intermediate exchange rate regimes.

This paper studies the institutional design of the coordination of macroeconomic stabilization policies within a monetary union in the framework of linear quadratic differential games. A central role in the analysis plays the partitioned game approach of the endogenous coalition formation literature. The specific policy recommendations in the EMU context depend on the particular characteristics of the shocks and the economic structure. In the case of a common shock, fiscal coordination or full policy coordination is desirable. When asymmetric shocks are considered, fiscal coordination improves the performance but full policy coordination doesn?t produce further gains in policymakers? welfare.

Victor Hugo (1802-1885) is one of the few nineteenth century European writers and intellectuals who, during this very nationalistic epoch, expressed a consistent theory of European political and economic unification. The idea of the « United States of Europe » is as far-reaching and, for most people, utopian today as it was in his time. Nonetheless, some of Hugo's ideas have materialized, such as monetary union, and the disappearance of national borders within the Schengen heartland. This paper tries to evaluate the complex interplay, in European integration, between utopia and realpolitik.

Financial services in Europe have undergone dramatic changes in recent years. Much of this is due to developments in information and communication technologies, the arrival of European Monetary Union and the ageing population. These will continue to be important drivers of change as the industry continues to evolve. The future may see the emergence of a few major global players though national sensitivities and preferences may limit mergers. "Surprise‐free", alternative and wild card scenarios are outlined and a range of issues which appear important for policy makers to consider is raised.

The ECB reform is designed to meet the challenges of an enlarged monetary union in the ECB Council. The reform is assessed by analysing alternatives for the classification of governors into groups of the rotation scheme like the synchronisation of the economic development of the member states. In a second approach, voting power indices are assigned to the governors allocated to the different groups instead of voting weights. Special attention is given to the difference between the political weight of a governor and the economic and population weight of its country of origin.

Joining the debate of dollarization occurring in Ecuador, Argentina, Mexico, & in Canada, the author asserts that dollarization is an actual process. The specific mode of integration is an integration "from below," ie, an integration resulting from reactions to important political & economic disorder by governments & economic agents, as opposed to an integration "from above," where the monetary union is but a part of a greater political project. The thesis presented here is that official dollarization occurs only after a country has undergone severe political & economic crisis: the most complex situations favor a unilateral dollarization. 1 Table. Adapted from the source document.

Book review in this articleProperty Rights and Competition: An Essay on the Constitution of Capitalism Wolfgang KasperThe Gold Standard in Theory and History (2nd edn.) Barry Eichengreen andHistory of Banking II, 1844–1959 Duncan M. Ross (ed.)Institutions and the Evolution of Modern Business Mark Casson andProfits and Morality Robin Cowan andLibertarians and Liberalism: Essays in Honour of Gerard Radnitzky Hardy Bouillon (ed.)Freedom to Trade: Refuting the New Protectionism Edward L. Hudgins (ed.)After Maastricht: A Guide to European Monetary Union John GrahlThe Economics of Organised Crime Gianluca Fiorentini andProfitability, Mechanization and Economies of Scale Dudley Jackson

Economic and Monetary Union in Europe: Moving Beyond Maastricht. By P. B. KENEN. Cambridge University Press. 1995. ix+219 pp. £30.00. Paperback £12.95. Incomes and the Welfare State: Essays on Britain and Europe. By ANTHONY B. ATKINSON. Cambridge University Press. 1995. xxi+368 pp. £40.00. Paperback £15.95. New Approaches to Macroeconomic Modeling: Evolutionary Stochastic Dynamics, Multiple Equilibria and Externalities as Field Effects. By MASANAO AOKI. Cambridge University Press. 1996. xv+288 pp. $35.00. The Crisis of Vision in Modern Economic Thought. By R. HEILBRONER and W. MILBERG. Cambridge University Press. 1995. ix+131 pp. £30. Paperback £10.95.

There are at least two reasons why sustainability of public debt is an issue of increasing importance. First, public choice considerations show the danger of an excessive use of deficit finance in a democracy. Second, the conditions of a European Monetary Union (EMU) imply further incentives for deficit finance. Various approaches to assess sustainability of public debt are presented and partially applied to the EC countries. According to these results, sustainability is as issue of empirical relevance in Europe today and has to be taken seriously on the further way to EMU.

With completion of the EC internal market in sight and economic and monetary union by the end of the decade looking probable, concern about social and economic disparities within the European Community has been growing. In the single market, the intensification of competition can be expected to expose the weakness of regions in difficulty, while the transition to EMU will place considerable burdens of adjustment on inflation-prone economies. On the whole, it is parts of the Community which are already disadvantaged, such as Greece or the South of Italy, which are most vulnerable to these changes.

Romania belongs to the group of the new EU members that are committed by the Treaty to adopt the euro, which implies that they must strive to fulfill all the nominal convergence criteria. Analyzing the Greece's monetary experience towards the EMU and its available policy instruments for this goal, this paper tries to derive some challenging lessons for Romania on its path to euro adoption. The present Greek debt crisis and the background of the global financial crisis are also taken into consideration. The Greek situation shows that an overly ambitious timetable and effort for adopting the single currency can be rather costly for the country concerned and the endeavor to improve the performance of the economy must be a permanent process and not be limited to satisfying the Maastricht convergence criteria. ; peer-reviewed

This paper proposes an ESTAR modeling framework to analyze the anchoring of inflation expectations. Anchoring criteria are empirical estimates of a market implied inflation target as well as the strength of the anchor that holds expectations at the target. Results from daily financial market expectations in the United States, European Monetary Union, United Kingdom and Sweden indicate: First, shorter-term expectations are better anchored than longer-term expectations. Second, expectations are best anchored in the EU, followed by US, Sweden and UK. Third, during the crisis market implied targets mostly decline while the strength of the anchor remains mostly unaffected.