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EMU: Why and How It Might Happen

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  • Charles Wyplosz

Abstract

This paper reviews the history, economic rationale, and main components of the project of establishing a monetary union in Europe by 1999. The adoption of a single currency is shown to be the best available option following the liberalization of capital movements. Most of the institution's design (central bank independence and objective, fiscal restraints) reflect Germany's fears of inflation as it is asked to give up its currency. The fiscal restraints are excessive, however, and a source of contractionary bias. The paper also presents the timetable of the final countdown.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.11.4.3
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 11 (1997)
Issue (Month): 4 (Fall)
Pages: 3-21

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Handle: RePEc:aea:jecper:v:11:y:1997:i:4:p:3-21

Note: DOI: 10.1257/jep.11.4.3
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  1. Ricci, Luca Antonio, 2007. "A Model of an Optimum Currency Area," Economics Discussion Papers 2007-45, Kiel Institute for the World Economy.
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  8. Giavazzi,Francesco & Micossi,Stefano & Miller,Marcus (ed.), 1989. "The European Monetary System," Cambridge Books, Cambridge University Press, number 9780521389051, April.
  9. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  10. Eichengreen, Barry & Portes, Richard, 1986. "The Anatomy of Financial Crises," CEPR Discussion Papers 130, C.E.P.R. Discussion Papers.
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  12. Tamim Bayoumi, 1994. "A Formal Model of Optimum Currency Areas," IMF Working Papers 94/42, International Monetary Fund.
  13. Cohen, Daniel & Wyplosz, Charles, 1989. "The European Monetary Union: An Agnostic Evaluation," CEPR Discussion Papers 306, C.E.P.R. Discussion Papers.
  14. Frankel, Jeffrey A & Rose, Andrew K, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, vol. 108(449), pages 1009-25, July.
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  17. Burda, Michael & Wyplosz, Charles, 2012. "Macroeconomics: A European Text," OUP Catalogue, Oxford University Press, edition 6, number 9780199608645, September.
  18. Xavier Sala-i-Martin & Jeffrey Sachs, 1991. "Fiscal Federalism and Optimum Currency Areas: Evidence for Europe From the United States," NBER Working Papers 3855, National Bureau of Economic Research, Inc.
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