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The Economic and Monetary Union: Current and Future Prospects

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  • Philip Arestis

    (University of East London and University of Leeds)

  • Malcolm Sawyer

    (The Jerome Levy Economics Institute of Bard College)

Abstract

The euro was adopted as legal tender, albeit in a virtual form, by 11 countries of the European Union on January 1, 1999, with the intention that notes and coins denominated in euros would be introduced and the national currencies would be phased out during the first six months of that year and that the euro would be fully operational by 2002. This paper first reviews the current position of the EMU member states in relation to the convergence criteria under the Maastricht Treaty and finds that there must have been a considerable degree of "fudge" for the criteria to have been met. The paper next looks at the central role of aggregate demand in the EMU and at concerns about unemployment. It next examines the prospects of the current EMU arrangements, concluding that they are highly deflationary. To overcome the deflationary bias of current proposals and as a means to alleviate the serious unemployment problem, the authors recommend that the European Central Bank be enhanced by (1) the development of a new institution, the European Union Development Bank, and (2) a modification of the Stability and Growth Pact.

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File URL: http://128.118.178.162/eps/mac/papers/0004/0004029.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0004029.

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Length: 37 pages
Date of creation: 09 Oct 2000
Date of revision:
Handle: RePEc:wpa:wuwpma:0004029

Note: Type of Document - Adobe Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 37; figures: included
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Web page: http://128.118.178.162

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References

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  1. Miller, M., 1997. "Eurosclerosis, Eurochicken and the Outlook for EMU," The Warwick Economics Research Paper Series (TWERPS) 482, University of Warwick, Department of Economics.
  2. Philip Arestis & Kevin McCauley & Malcolm Sawyer, 2000. "An Alternative Stability Pact for the European Union," Economics Working Paper Archive wp_296, Levy Economics Institute.
  3. Barry Eichengreen & Charles Wyplosz, 1998. "The Stability Pact: more than a minor nuisance?," Economic Policy, CEPR & CES & MSH, vol. 13(26), pages 65-113, 04.
  4. Goodhart, C A E, 1996. "The Transition to EMU," Scottish Journal of Political Economy, Scottish Economic Society, vol. 43(3), pages 241-57, August.
  5. Rudiger Dornbusch & Carlo A. Favero & Francesco Giavazzi, 1998. "The Immediate Challenges for the European Central Bank," NBER Working Papers 6369, National Bureau of Economic Research, Inc.
  6. Sefton, J A & In't Veld, J W, 1999. "Consumption and Wealth: An International Comparison," Manchester School, University of Manchester, vol. 67(4), pages 525-44, September.
  7. Thomas I. Palley, 1998. "Restoring Prosperity: Why the U.S. Model Is Not the Answer for the United States or Europe," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 20(3), pages 337-353, April.
  8. Eichengreen, Barry, 1993. "European Monetary Unification," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1321-57, September.
  9. Marco BUTI & Daniele FRANCO & Hedwig ONGENA, 1997. "Budgeetary Policies during Recessions : Retrospective Application of the Stability and Growth Pact” to the Post-War Period," Discussion Papers (REL - Recherches Economiques de Louvain) 1997041, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  10. Dafflon, Bernard & Rossi, Sergio, 1999. " Public Accounting Fudges towards EMU: A First Empirical Survey and Some Public Choice Considerations," Public Choice, Springer, vol. 101(1-2), pages 59-84, October.
  11. repec:sae:niesru:v:152:y::i:1:p:76-96 is not listed on IDEAS
  12. Cochrane, John H, 1988. "How Big Is the Random Walk in GNP?," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 893-920, October.
  13. Antonio Fatás, 1998. "Does EMU need a fiscal federation?," Economic Policy, CEPR & CES & MSH, vol. 13(26), pages 163-203, 04.
  14. Rudi Dornbusch & Carlo Favero & Francesco Giavazzi, 1998. "Immediate challenges for the European Central Bank," Economic Policy, CEPR & CES & MSH, vol. 13(26), pages 15-64, 04.
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Cited by:
  1. Philip Arestis & Kevin McCauley & Malcolm Sawyer, 2000. "An Alternative Stability Pact for the European Union," Economics Working Paper Archive wp_296, Levy Economics Institute.
  2. Philip Arestis & Malcolm Sawyer, 2001. "Will the Euro Bring Economic Crisis to Europe?," Macroeconomics 0103003, EconWPA.

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