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A Common Monetary Standard or a Common Currency for Europe? Fiscal Lessons from the United States

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  • McKinnon, Ronald I

Abstract

In a federal system, a common currency controlled by the central government (or some other outside agent) enhances the economic benefits from merchantile competition among lower governments because it hardens their budget constraints. Among American states, tax and regulatory competition generally improves resource allocation, i.e., it is 'market-preserving.' Because a common currency in Europe is not feasible, unrestricted horizontal mercantile competition among European nation states is less benign and may worsen resource allocation. Copyright 1994 by Scottish Economic Society.

Suggested Citation

  • McKinnon, Ronald I, 1994. "A Common Monetary Standard or a Common Currency for Europe? Fiscal Lessons from the United States," Scottish Journal of Political Economy, Scottish Economic Society, vol. 41(4), pages 337-357, November.
    • Handle: RePEc:bla:scotjp:v:41:y:1994:i:4:p:337-57
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    Cited by:

    1. M.J. Artis, 2003. "Reflections on the optimal currency area (OCA) criteria in the light of EMU," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 8(4), pages 297-307.
    2. Michael J. Artis & Marco Buti, 2000. "‘Close‐to‐Balance or in Surplus’: A Policy‐Maker's Guide to the Implementation of the Stability and Growth Pact," Journal of Common Market Studies, Wiley Blackwell, vol. 38(4), pages 563-591, November.
    3. Korkut Erturk, 2003. "On the Changing Nature of Currency Crises," Working Paper Series, Department of Economics, University of Utah 2003_02, University of Utah, Department of Economics.
    4. Lars Jonung & Eoin Drea, 2010. "It Can't Happen, It's a Bad Idea, It Won't Last: U.S. Economists on the EMU and the Euro, 1989–2002," Econ Journal Watch, Econ Journal Watch, vol. 7(1), pages 1-4–52, January.
    5. Hall, S.G. & Yhap, B., 2008. "Measuring the Correlation of Shocks Between the UK and the Core of Europe," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 5(1), pages 17-26, March.
    6. Stephen Hall & George Hondroyiannis, 2006. "Measuring the correlation of shocks between the EU15 and the new member countries," Economic Change and Restructuring, Springer, vol. 39(1), pages 19-34, June.
    7. Peter Nijkamp & Shunii Wang, 1998. "Winners and loosers in the European Monetary Union: A neural network analysis of spatial industrial shifts," ERSA conference papers ersa98p377, European Regional Science Association.
    8. repec:onb:oenbwp:y::i:69:b:1 is not listed on IDEAS

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