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The Transition To European Monetary Union And The European Monetary Institute

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  • JÜRGEN VON HAGEN
  • MICHELE FRATIANNI

Abstract

The European Monetary Institute (EMI) will prepare a framework for European Monetary Union (EMU) monetary policy during the transition to the EMU. This involves a trade‐off between deepening financial market integration and harmonizing central bank instruments, a choice between centralized and decentralized monetary strategies with significant welfare implications, and a trade‐off between expected welfare and certainty of policy outcomes. As a result of being dominated by national central bankers and of the conflict between the core and the periphery of the European Community (EC), the EMI is biased toward an inefficient solution. Enlargement of the EC by the European Free Trade Area (EFTA) group would raise the probability of a more efficient, two‐track EMU, which initially would involve only the core group.

Suggested Citation

  • Jürgen Von Hagen & Michele Fratianni, 1993. "The Transition To European Monetary Union And The European Monetary Institute," Economics and Politics, Wiley Blackwell, vol. 5(2), pages 167-186, July.
    • Handle: RePEc:bla:ecopol:v:5:y:1993:i:2:p:167-186
    DOI: 10.1111/j.1468-0343.1993.tb00073.x
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    References listed on IDEAS

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    1. David Folkerts-Landau & Peter M. Garber, 1992. "The European Central Bank: A Bank or a Monetary Policy Rule," NBER Working Papers 4016, National Bureau of Economic Research, Inc.
    2. Fratianni, Michele & von Hagen, Juergen, 1990. "The European Monetary System ten years after," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 32(1), pages 173-241, January.
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