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Designing Fiscal and Monetary Institutions for a European Monetary Union

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  • Beetsma, Roel
  • Bovenberg, A Lans

Abstract

This paper explores under what conditions a European Monetary Union (EMU) is an optimum currency area. The scope for an EMU increases with convergence of structural and fiscal policies, small money holdings, a conservative European Central Bank, and dependent national central banks. How national policies affect the rest of the Union once the EMU has been formed is also investigated. The case for surveillance of national structural and fiscal policies appears to depend largely on monetary arrangements in the Union.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1303.

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Date of creation: Nov 1995
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Handle: RePEc:cpr:ceprdp:1303

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Keywords: Convergence; European Central Bank; European Monetary Union; Inflation Aversion; Optimal Institutions; Structural Policies;

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References

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  1. Beetsma, Roel M. W. J. & Lans Bovenberg, A., 1997. "Designing fiscal and monetary institutions in a second-best world," European Journal of Political Economy, Elsevier, vol. 13(1), pages 53-79, February.
  2. Charles R. Bean, 1992. "Economic and Monetary Union in Europe," Journal of Economic Perspectives, American Economic Association, vol. 6(4), pages 31-52, Fall.
  3. Levine, Paul & Brociner, Andrew, 1994. "Fiscal policy coordination and EMU : A dynamic game approach," Journal of Economic Dynamics and Control, Elsevier, vol. 18(3-4), pages 699-729.
  4. Alesina, Alberto & Tabellini, Guido, 1987. "Rules and Discretion with Noncoordinated Monetary and Fiscal Policies," Economic Inquiry, Western Economic Association International, vol. 25(4), pages 619-30, October.
  5. Tamim Bayoumi, 1994. "A Formal Model of Optimum Currency Areas," IMF Staff Papers, Palgrave Macmillan, vol. 41(4), pages 537-554, December.
  6. Kenen,Peter B., 2000. "The International Economy," Cambridge Books, Cambridge University Press, number 9780521644358.
  7. Buiter, Willem H & Kletzer, Kenneth, 1990. "Reflections on the Fiscal Implications of a Common Currency," CEPR Discussion Papers 418, C.E.P.R. Discussion Papers.
  8. Thomas Krichel & Paul Levine & Joseph Pearlman, 1994. "Fiscal and Monetary Policy in a Monetary Union: Credible Inflation Targets or Monetised Debt?," School of Economics Discussion Papers 9403, School of Economics, University of Surrey.
  9. Levine, Paul, 1993. "Fiscal Policy Co-ordination under EMU and the Choice of Monetary Instrument," The Manchester School of Economic & Social Studies, University of Manchester, vol. 61(0), pages 1-12, Suppl..
  10. Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, vol. 100(4), pages 1169-89, November.
  11. Laskar, Daniel, 1989. "Conservative central bankers in a two-country world," European Economic Review, Elsevier, vol. 33(8), pages 1575-1595, October.
  12. Barry Eichengreen & Jeffry Frieden, 1993. "The Political Economy Of European Monetary Unification: An Analytical Introduction," Economics and Politics, Wiley Blackwell, vol. 5(2), pages 85-104, 07.
  13. Eichengreen, Barry, 1993. "European Monetary Unification," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1321-57, September.
  14. Lohmann, Susanne, 1992. "Optimal Commitment in Monetary Policy: Credibility versus Flexibility," American Economic Review, American Economic Association, vol. 82(1), pages 273-86, March.
  15. Buiter, W.H. & Kletzer, K.M., 1990. "Reflections On Fiscal Implications Of Common Currency," Papers 613, Yale - Economic Growth Center.
  16. Levine, Paul L & Pearlman, Joseph, 1992. "Fiscal and Monetary Policy Under EMU: Credible Inflation Targets or Unpleasant Monetary Arithmetic?," CEPR Discussion Papers 701, C.E.P.R. Discussion Papers.
  17. Tabellini, Guido, 1986. "Money, debt and deficits in a dynamic game," Journal of Economic Dynamics and Control, Elsevier, vol. 10(4), pages 427-442, December.
  18. Alberto Alesina & Vittorio Grilli, 1993. "On the Feasibility of a One or Multi-Speed European Monetary Union," NBER Working Papers 4350, National Bureau of Economic Research, Inc.
  19. Guy Debelle & Stanley Fischer, 1994. "How independent should a central bank be?," Working Papers in Applied Economic Theory 94-05, Federal Reserve Bank of San Francisco.
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Citations

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Cited by:
  1. van Aarle, Bas & Huart, Florence, 1999. "Monetary and fiscal unification in the EU: a stylized analysis," Journal of Economics and Business, Elsevier, vol. 51(1), pages 49-66, January.
  2. Uhlig, H.F.H.V.S., 2002. "One Money, But Many Fiscal Policies in Europe: What are the Consequences?," Discussion Paper 2002-32, Tilburg University, Center for Economic Research.
  3. Beetsma, R.M.W.J. & Bovenberg, A.L., 1995. "Monetary Union without Fiscal Coordination May Discipline Policymakers," DELTA Working Papers 95-22, DELTA (Ecole normale supérieure).
  4. Jürgen von Hagen & Susanne Mundschenk, 2002. "Fiscal and Monetary Policy Coordination in EMU," Working Papers 70, Oesterreichische Nationalbank (Austrian Central Bank).
  5. Jürgen von Hagen & Susanne Mundschenk, 2002. "Koordinierung der Geld- und Fiskalpolitik in der EWU," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 71(3), pages 325-338.
  6. Andrew Hughes Hallett, 2008. "Sustainable fiscal policies and budgetary risk under alternative monetary policy arrangements," Economic Change and Restructuring, Springer, vol. 41(1), pages 1-28, March.
  7. Acocella Nicola & Di Bartolomeo Giovanni & Tirelli Patrizio, 2007. "The macroeconomics of social pacts," wp.comunite 0028, Department of Communication, University of Teramo.
  8. Michel Beine & Frédéric Docquier, 1998. "A stochastic simulation model of an optimum currency area," ULB Institutional Repository 2013/10461, ULB -- Universite Libre de Bruxelles.
  9. Di Gioacchino, Debora & Ginebri, Sergio & Sabani, Laura, 2004. "Political support to public debt repudiation in a Monetary Union - the role of the geographical allocation of debt," Economics & Statistics Discussion Papers esdp04019, University of Molise, Dept. EGSeI.
  10. Sergey Merzlyakov, 2012. "Strategic Interaction Between Fiscal and Monetary Policies in an Export-Oriented Economy," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(2), pages 201-216, May.

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