European Monetary Union or Hard EMS?
This paper contributes to the debate engendered by the Delors Report on the issue of European Monetary Union. It focuses on the options of a strengthened (or hard-) EMS, with a commitment to a fixed exchange rate relative to the Deutschmark, or a European central bank with full monetary union (EMU). Under hard-EMS, an anti-inflationary reputation is acquired by all as a result of Bundesbank credibility. As regards EMU, it is possible that too rapid a move through the latter stages of the Delors process will produce a central bank with little or no anti-inflation credibility. Here we make starkest assumption of no credibility under EMU, and compare it with hard-EMS for various supply and demand shocks using a two-bloc model, the latter exhibiting short-run wage/price stickiness but with long run natural rate properties. A non-EMS regime with floating exchange rates is used to examine the incentive compatibility of hard-EMS and EMU, with a cooperative reputational regime acting as a benchmark.
|Date of creation:||Oct 1990|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:472. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.