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The European Central Bank, the Euro, and Global Financial Markets

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  • Kathryn M. E. Dominguez

Abstract

The economic case for European monetary union was shaky at best when it was first discussed 35 years ago. Europe's leaders felt that monetary union was the capstone to their efforts to create an integrated Europe, and much to the rest of the world's surprise, they succeeded. The introduction of the euro and the establishment of the European Central Bank (ECB) as the monetary authority of Europe went much more smoothly than many predicted. But nagging doubts about the wisdom of integration persist. The slim margins by which the Maastricht Treaty passed and the wide margin on which the European Constitution failed are reminders that Europeans are still wary of giving up their national sovereignty. This wariness also influences the ability of the ECB to efficiently take over monetary policy and limits the ability of the euro to become a true rival of the dollar in global financial markets.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.20.4.67
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Bibliographic Info

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

Volume (Year): 20 (2006)
Issue (Month): 4 (Fall)
Pages: 67-88

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Handle: RePEc:aea:jecper:v:20:y:2006:i:4:p:67-88

Note: DOI: 10.1257/jep.20.4.67
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  1. Charles Wyplosz, 1997. "EMU: Why and How It Might Happen," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 3-21, Fall.
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  4. Duval, Romain & Elmeskov, Jørgen, 2006. "The effects of EMU on structural reforms in labour and product markets," Working Paper Series 0596, European Central Bank.
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  8. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
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Cited by:
  1. Elias Papaioannou & Richard Portes, 2008. "The international role of the euro: a status report," European Economy - Economic Papers 317, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  2. Yucel, Eray, 2011. "A Review and Bibliography of Early Warning Models," MPRA Paper 32893, University Library of Munich, Germany.
  3. Patrick McGuire & Nikola Tarashev, 2007. "International banking with the euro," BIS Quarterly Review, Bank for International Settlements, December.

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