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Costs and Benefits of Monetary Union

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  • Eichengreen, Barry

Abstract

This paper analyses the costs and benefits of European monetary unification. The benefits take the form of the reduction in exchange risk, equalization of interest rates, decline in relative price variability and general increase in economic efficiency likely to accompany unification. The costs include loss of national autonomy over monetary and fiscal policies. Historical evidence and the experience of the US currency and customs union are used as sources of evidence on both the benefits and costs. Conditions are isolated under which the sacrifice of monetary and fiscal autonomy is likely to be significant. Institutional innovations such as fiscal federalism within the EC and expanded swap facilities within the EMS are proposed for dealing with the strains that are likely to arise in Stage 2 of the Delors Plan.

Suggested Citation

  • Eichengreen, Barry, 1990. "Costs and Benefits of Monetary Union," CEPR Discussion Papers 453, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:453
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    References listed on IDEAS

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    1. Fishlow, Albert, 1985. "Lessons from the past: capital markets during the 19th century and the interwar period," International Organization, Cambridge University Press, vol. 39(03), pages 383-439, June.
    2. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-329, June.
    3. Crafts, N. F. R., 1983. "Gross national product in Europe 1870-1910: Some new estimates," Explorations in Economic History, Elsevier, vol. 20(4), pages 387-401, October.
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    1. repec:kap:openec:v:28:y:2017:i:5:d:10.1007_s11079-017-9466-8 is not listed on IDEAS

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    Keywords

    EMU; Monetary Policy; Monetary Union;

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