EMU: Ready, or Not?
AbstractIn this paper I focus on two specific hazard areas in the transition from Stage Two to Stage Three of European economic and monetary union (EMU), as well as on some key problems of Stage Three that EMUâ€™s monetary and fiscal structures appear ill-prepared to handle. The transitional hazards are of considerable theoretical as well as policy interest: the best way to coordinate monetary stances and lock exchange parities for a smooth switch from eleven national currencies to a single joint currency. A third problem, one that is central for EMU and to any currency union, lies behind the difficulty of the transition: the possibility of nationally asymmetric real shocks. I review that topic in the context of Irelandâ€™s recent experience. The paper goes on to discuss weaknesses in the structure of Stage Three, already much noted, connected with the provision of lender of last resort facilities in the euro zone and the framework for supervising financial institutions. The deficit and debt limits embodied in the excessive deficits procedure of the Maastricht treaty and the subsequent Stability and Growth Pact have been justified by the threat high debts might pose to the stability of the euro zoneâ€™s financial markets. I consider the past and prospective fiscal adjustments of the EMU 11, and suggest these might pose future difficulties for macroeconomic policy and growth.
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Bibliographic InfoPaper provided by Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley in its series Center for International and Development Economics Research, Working Paper Series with number qt8qn3v8j3.
Date of creation: 02 Jul 1998
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EMU; euro; European integration;
Other versions of this item:
- Maurice Obstfeld, 1999. "EMU: Ready, or Not?," NBER Working Papers 6682, National Bureau of Economic Research, Inc.
- Maurice Obstfeld., 1998. "EMU: Ready, or Not?," Center for International and Development Economics Research (CIDER) Working Papers C98-101, University of California at Berkeley.
- Maurice Obstfeld, 2000. "EMU: Ready, or Not?," International Trade 0003001, EconWPA.
- Obstfeld, M., 1998. "EMU: Ready or Not?," Princeton Essays in International Economics 209, International Economics Section, Departement of Economics Princeton University,.
- F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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