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The Assessment: EMU, Four Years On

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  • Christopher Allsopp
  • Michael J. Artis

Abstract

This paper reviews the functioning of the Economic and Monetary Union over the first 4 years of its existence. Monetary policy is viewed as having been of the 'inflation-targeting' type, but with a tendency towards delay and conservatism in adjustment, which may also reflect over-optimistic output growth forecasts. The resulting pressure on the Stability and Growth Pact (SGP) illustrates the weakness in the 'consensus view' of the harmonious interaction of monetary, fiscal, and supply-side policies, which requires policy in all three areas to be 'correct'. In discussing reform of the SGP, a looser but still constraining form of fiscal agreement is advocated. The supply-side and balance-of-payments issues involved in inter-country adjustment also interact importantly with the SGP and are identified as key areas of difficulty in a still 'immature' monetary union, with separate labour-market structures. Here the mechanisms for coordination are more or less absent. Copyright 2003, Oxford University Press.

Suggested Citation

  • Christopher Allsopp & Michael J. Artis, 2003. "The Assessment: EMU, Four Years On," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 19(1), pages 1-29.
    • Handle: RePEc:oup:oxford:v:19:y:2003:i:1:p:1-29
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    Cited by:

    1. Eckhard Hein & Torsten Niechoj, 2005. "Leitlinien für ein dauerhaftes Wachstum in der EU? Konzept und Wirkung der "Grundzüge der Wirtschaftspolitik"," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 31(1), pages 11-40.
    2. Truger, Achim & Hein, Eckhard, 2004. "Macroeconomic co-ordination as an economic policy concept : opportunities and obstacles in the EMU," WSI Working Papers 125, The Institute of Economic and Social Research (WSI), Hans Böckler Foundation.
    3. Marco Buti & Martin Larch & Fabio Balboni, 2009. "Monetary and fiscal policy interactions in the EMU when cyclical conditions are uncertain," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 36(1), pages 21-44, February.
    4. Giancarlo Corsetti & Michael P. Devereux & John Hassler & Tim Jenkinson & Gilles Saint-Paul & Hans-Werner Sinn & Jan-Egbert Sturm & Xavier Vives, 2009. "Chapter 1: The European Economy: Macroeconomic Outlook and Policy," EEAG Report on the European Economy, CESifo, vol. 0, pages 11-57, February.
    5. Juan Duque & Raúl Ramos & Jordi Suriñach, 2006. "Wages and productivity: the role of labour market institutions in OECD countries," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 33(4), pages 231-243, September.
    6. Arne Heise & Özlem Görmez Heise, 2010. "Europäische Wirtschaftsregierung - Notwendige Ergänzung der EWU oder unrealistische Illusion?," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 36(3), pages 325-347.
    7. Bonatti, Luigi & Cristini, Annalisa, 2008. "Breaking the Stability Pact: Was it predictable?," Journal of Policy Modeling, Elsevier, vol. 30(5), pages 793-810.
    8. Servaas Deroose & Sven Langedijk & Werner Roeger, 2004. "Reviewing adjustment dynamics in EMU: from overheating to overcooling," European Economy - Economic Papers 2008 - 2015 198, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    9. Tausch, Arno, 2016. "‘Smart development’. An essay on a new political economy of the environment," MPRA Paper 70204, University Library of Munich, Germany.
    10. Buti, M. & Eijffinger, S.C.W. & Franco, D., 2005. "The Stability pact Pains : A Forward-Looking Assessment of the Reform Debate," Discussion Paper 2005-101, Tilburg University, Center for Economic Research.
    11. Paolo Biraschi, "undated". "Searching for the optimal EMU fiscal rule:an ex-post analysis of the SGP reform proposals," Working Papers wp2008-7, Department of the Treasury, Ministry of the Economy and of Finance.
    12. Arno Tausch & Almas Heshmati, 2013. "Worker remittances and the global preconditions of ‘smart development’," Society and Economy, Akadémiai Kiadó, Hungary, vol. 35(1), pages 25-50, April.
    13. Servaas Deroose & Dermot Hodson & Joost Kuhlmann, 2008. "The Broad Economic Policy Guidelines: Before and After the Re-launch of the Lisbon Strategy," Journal of Common Market Studies, Wiley Blackwell, vol. 46, pages 827-848, September.
    14. Arno Tausch & Almas Heshmati, 2012. "Migration, Openness and the Global Preconditions of "Smart Development"," Bogazici Journal, Review of Social, Economic and Administrative Studies, Bogazici University, Department of Economics, vol. 26(2), pages 1-62.
    15. Fabio Balboni & Marco Buti & Martin Larch, 2007. "ECB vs Council vs Commission: Monetary and fiscal policy interactions in the EMU when cyclical conditions are uncertain," European Economy - Economic Papers 2008 - 2015 277, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    16. Pusch, Toralf & Heise, Arne, 2008. "Central Banks, Trade Unions and Reputation – Is there Room for an Expansionist Manoeuvre in the European Union?," MPRA Paper 19719, University Library of Munich, Germany.
    17. Eckhard Hein & Thorsten Niechoj, 2005. "Guidelines for sustained growth in the EU ? The concept and consequences of the Broad Economic Policy Guidelines," IMK Working Paper 02-2005, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    18. Miquel Clar & Christian Dreger & Raúl Ramos, 2007. "Wage Flexibility and Labour Market Institutions: A Meta‐Analysis," Kyklos, Wiley Blackwell, vol. 60(2), pages 145-163, May.
    19. Gordon L Clark & Theo Palaskas & Paul Tracey & Maria Tsampra, 2004. "Market Revenue and the Scope and Scale of SME Networks in Europe's Vulnerable Regions," Environment and Planning A, , vol. 36(7), pages 1305-1326, July.
    20. Martin Larch & Matteo Salto, 2005. "Fiscal rules, inertia and discretionary fiscal policy," Applied Economics, Taylor & Francis Journals, vol. 37(10), pages 1135-1146.
    21. Leopold Diebalek & Walpurga Köhler-Töglhofer & Doris Prammer, 2006. "Reform of the Stability and Growth Pact," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q1/06, pages 78-109.
    22. Leopold Diebalek & Doris Prammer, 2006. "Reform of the Stability and Growth Pact," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 78-109.
    23. Joerg Bibow, 2006. "Inflation Persistence and Tax-Push Inflation in Germany and in the Euro Area: A Symptom of Macroeconomic Mismanagement?," IMK Studies 01-2006, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    24. Green, Christopher J. & Bai, Ye, 2008. "The euro: Did the markets cheer or jeer?," Journal of Policy Modeling, Elsevier, vol. 30(3), pages 431-446.

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