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 EMU'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 parties for a smooth switch from eleven national currencies to a single joint currency. A third problems, 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 Ireland'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 embodies in the excessive deficits procedure of the Maastrich treaty and the subsequent Stability and Growth Pact have been justified by the threat high debts might pose to the stability of the euro zone'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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6682.
Date of creation: Aug 1999
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Publication status: published as Princeton Essays in International Finance, no. 209, July 1998
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Other versions of this item:
- 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,.
- Maurice Obstfeld., 1998. "EMU: Ready, or Not?," Center for International and Development Economics Research (CIDER) Working Papers C98-101, University of California at Berkeley.
- Obstfeld, Maurice, 1998. "EMU: Ready, or Not?," Center for International and Development Economics Research, Working Paper Series qt8qn3v8j3, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
- 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
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