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Designing Fiscal and Monetary Institutions for a European Monetary Union

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  • Beetsma, Roel M W J
  • Bovenberg, A Lans

Abstract

This paper explores the conditions under which a European Monetary Union (EMU) is an optimum currency area. The scope for an EMU increases with the 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 established is also investigated. The case for surveillance of national structural and fiscal policies appears to depend mainly on the monetary arrangements in the union. Copyright 2000 by Kluwer Academic Publishers

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  • Beetsma, Roel M W J & Bovenberg, A Lans, 2000. "Designing Fiscal and Monetary Institutions for a European Monetary Union," Public Choice, Springer, vol. 102(3-4), pages 247-269, March.
  • Handle: RePEc:kap:pubcho:v:102:y:2000:i:3-4:p:247-69
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    1. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, Oxford University Press, vol. 100(4), pages 1169-1189.
    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. Lohmann, Susanne, 1992. "Optimal Commitment in Monetary Policy: Credibility versus Flexibility," American Economic Review, American Economic Association, vol. 82(1), pages 273-286, March.
    4. Beetsma, Roel M W J & Bovenberg, A Lans, 2000. "Designing Fiscal and Monetary Institutions for a European Monetary Union," Public Choice, Springer, vol. 102(3-4), pages 247-269, March.
    5. 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.
    6. Tamim Bayoumi, 1994. "A Formal Model of Optimum Currency Areas," IMF Staff Papers, Palgrave Macmillan, vol. 41(4), pages 537-554, December.
    7. Thomas Krichel & Paul Levine & Joseph Pearlman, 1996. "Fiscal and monetary policy in a monetary union: Credible inflation targets or monetized debt?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 132(1), pages 28-54, March.
    8. Alesina, Alberto & Tabellini, Guido, 1987. "Rules and Discretion with Noncoordinated Monetary and Fiscal Policies," Economic Inquiry, Western Economic Association International, vol. 25(4), pages 619-630, October.
    9. 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.
    10. Eichengreen, Barry, 1993. "European Monetary Unification," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1321-1357, September.
    11. Laskar, Daniel, 1989. "Conservative central bankers in a two-country world," European Economic Review, Elsevier, vol. 33(8), pages 1575-1595, October.
    12. 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.
    13. Guy Debelle & Stanley Fischer, 1994. "How independent should a central bank be?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 38, pages 195-225.
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    15. Alesina, Alberto F & Grilli, Vittorio, 1993. "On the Feasibility of a One- or Multi-Speed European Monetary Union," CEPR Discussion Papers 792, C.E.P.R. Discussion Papers.
    16. 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..
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    Cited by:

    1. 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.
    2. Jürgen von Hagen & Susanne Mundschenk, 2003. "Fiscal and monetary policy coordination in EMU," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 8(4), pages 279-295.
    3. 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.
    4. Beetsma, Roel M. W. J. & Lans Bovenberg, A., 1998. "Monetary union without fiscal coordination may discipline policymakers," Journal of International Economics, Elsevier, vol. 45(2), pages 239-258, August.
    5. Beetsma, Roel M W J & Bovenberg, A Lans, 2000. "Designing Fiscal and Monetary Institutions for a European Monetary Union," Public Choice, Springer, vol. 102(3-4), pages 247-269, March.
    6. Uhlig, Harald, 2002. "One Money, but Many Fiscal Policies in Europe: What Are the Consequences?," CEPR Discussion Papers 3296, C.E.P.R. Discussion Papers.
    7. 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.
    8. Michel Beine & FréDéric Docquier, 1998. "A Stochastic Simulation Model of an Optimum Currency Area," Open Economies Review, Springer, vol. 9(3), pages 229-257, July.
    9. Acocella, Nicola & Di Bartolomeo, Giovanni & Tirelli, Patrizio, 2009. "The macroeconomics of social pacts," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 202-213, October.
    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.
    11. 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.

    More about this item

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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