Macroeconomic Policy During a Transition to Monetary Union
AbstractThe main conclusions of this paper are the following. In order to minimize switching costs, the name of the new EU currency should be the Deutschmark. Differential national requirements for seigniorage revenue provide a weak case for retaining national monetary independence. From the point of view of adjustment to asymmetric shocks, nominal exchange rate flexibility is at best a limited blessing and at worst a limited curse. Inter-state labour mobility in the United States does not compensate for the absence of state-level exchange rate flexibility. The absence of significant inter-member fiscal redistribution mechanisms in the EU is not an obstacle to monetary union. Convergence or divergence in real economic performance is irrelevant for monetary union. A common currency is the logical implication of unrestricted international mobility of financial capital. The Maastricht criteria are unlikely to hinder monetary union. There are no convincing economic objections left to monetary union in the EU.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1222.
Date of creation: Aug 1995
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- W.H. Buiter, 1995. "Macroeconomic Policy During a Transition to Monetary Union," CEP Discussion Papers dp0261, Centre for Economic Performance, LSE.
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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