IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Policy Options for Joining the Euro

  • Alain de Crombrugghe

Assuming the eventual adoption of the Euro, the paper reviews the run-up and the medium run issues on the path towards the Euro. It shows that various policy options are possible, especially with respect to the exchange rate regime and management. It also shows the limits of monetary policy when fiscal and income policies are not consistent with monetary policy. In the run-up phase of accession, the main constraints come from the recommendation to target a conversion exchange rate, while major gains can be obtained from an increase in money demand and a fall in interest rates once market expectations converge towards the conversion. In the medium run preparation, a fixed exchange rate extracts a high price in terms of high real interest rates and losses of competitiveness, unless fiscal policy is tight and wage settlement are market-based or kept under control. Floating exchange rates do not necessarily solve these problems but enable monetary policy to regain some of the effectiveness that it loses under fixed exchange rates. Eventually, a sound fiscal and income policy opens the way to a scenario of accommodating monetary policy and convergence towards the Euro. A political reading of the Maastricht conditions suggests that early adoption of the Euro is unlikely to be supported by the incumbents. It would then only make sense as a way out of a crisis.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.econ.kuleuven.be/licos/publications/dp/dp103.pdf
Download Restriction: no

Paper provided by LICOS - Centre for Institutions and Economic Performance, KU Leuven in its series LICOS Discussion Papers with number 10301.

as
in new window

Length: 33 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:lic:licosd:10301
Contact details of provider: Postal: De BĂ©riotstraat 34, B-3000 Leuven
Phone: +32 (0) 16 / 32 6598
Fax: +32 (0) 16 / 32 6599
Web page: http://www.econ.kuleuven.be/licosEmail:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Lars E.O. Svensson, 1990. "The Simplest Test of Target Zone Credibility," NBER Working Papers 3394, National Bureau of Economic Research, Inc.
  2. Ball, Laurence & Mankiw, N Gregory, 1995. "Relative-Price Changes as Aggregate Supply Shocks," The Quarterly Journal of Economics, MIT Press, vol. 110(1), pages 161-93, February.
  3. Seppo Honkapohja & Erkki Koskela, 1999. "The economic crisis of the 1990s in Finland," Economic Policy, CEPR;CES;MSH, vol. 14(29), pages 399-436, October.
  4. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 7-46, 04.
  5. Heliodoro Temprano-Arroyo & Robert A. Feldman, 1999. "Selected transition and Mediterranean countries: an institutional primer on EMU and EU accession," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(3), pages 741-805, November.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:lic:licosd:10301. 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: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.