IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpma/0004029.html
   My bibliography  Save this paper

The Economic and Monetary Union: Current and Future Prospects

Author

Listed:
  • Philip Arestis

    (University of East London and University of Leeds)

  • Malcolm Sawyer

    (The Jerome Levy Economics Institute of Bard College)

Abstract

The euro was adopted as legal tender, albeit in a virtual form, by 11 countries of the European Union on January 1, 1999, with the intention that notes and coins denominated in euros would be introduced and the national currencies would be phased out during the first six months of that year and that the euro would be fully operational by 2002. This paper first reviews the current position of the EMU member states in relation to the convergence criteria under the Maastricht Treaty and finds that there must have been a considerable degree of "fudge" for the criteria to have been met. The paper next looks at the central role of aggregate demand in the EMU and at concerns about unemployment. It next examines the prospects of the current EMU arrangements, concluding that they are highly deflationary. To overcome the deflationary bias of current proposals and as a means to alleviate the serious unemployment problem, the authors recommend that the European Central Bank be enhanced by (1) the development of a new institution, the European Union Development Bank, and (2) a modification of the Stability and Growth Pact.

Suggested Citation

  • Philip Arestis & Malcolm Sawyer, 2000. "The Economic and Monetary Union: Current and Future Prospects," Macroeconomics 0004029, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpma:0004029
    Note: Type of Document - Adobe Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 37; figures: included
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/0004/0004029.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Sefton, J A & In't Veld, J W, 1999. "Consumption and Wealth: An International Comparison," Manchester School, University of Manchester, vol. 67(4), pages 525-544, September.
    2. repec:sae:niesru:v:152:y::i:1:p:76-96 is not listed on IDEAS
    3. Antonio Fatás, 1998. "Does EMU need a fiscal federation?," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 13(26), pages 164-203.
    4. Thomas I. Palley, 1998. "Restoring Prosperity: Why the U.S. Model Is Not the Answer for the United States or Europe," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 20(3), pages 337-353, March.
    5. Cochrane, John H, 1988. "How Big Is the Random Walk in GNP?," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 893-920, October.
    6. Rudi Dornbusch & Carlo Favero & Francesco Giavazzi, 1998. "Immediate challenges for the European Central Bank," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 13(26), pages 16-64.
    7. Eichengreen, Barry, 1993. "European Monetary Unification," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1321-1357, September.
    8. Arestis, Philip & McCauley, Kevin & Sawyer, Malcolm, 2001. "An Alternative Stability Pact for the European Union," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 25(1), pages 113-130, January.
    9. Marco BUTI & Daniele FRANCO & Hedwig ONGENA, 1997. "Budgeetary Policies during Recessions : Retrospective Application of the Stability and Growth Pact” to the Post-War Period," Discussion Papers (REL - Recherches Economiques de Louvain) 1997041, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    10. J. A. Sefton & J. W. In’t Veld, 1999. "Consumption and Wealth: An International Comparison," Manchester School, University of Manchester, vol. 67(4), pages 525-544, September.
    11. Miller, M., 1997. "Eurosclerosis, Eurochicken and the Outlook for EMU," The Warwick Economics Research Paper Series (TWERPS) 482, University of Warwick, Department of Economics.
    12. John Cornwall & Wendy Cornwall, 1997. "The Unemployment Problem and the Legacy of Keynes," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 19(4), pages 525-542, July.
    13. Barry Eichengreen & Charles Wyplosz, 1998. "The Stability Pact: more than a minor nuisance?," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 13(26), pages 66-113.
    14. Dafflon, Bernard & Rossi, Sergio, 1999. "Public Accounting Fudges towards EMU: A First Empirical Survey and Some Public Choice Considerations," Public Choice, Springer, vol. 101(1-2), pages 59-84, October.
    15. Philip Arestis, 1997. "Money, Pricing, Distribution and Economic Integration," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-37448-5.
    16. Goodhart, C A E, 1996. "The Transition to EMU," Scottish Journal of Political Economy, Scottish Economic Society, vol. 43(3), pages 241-257, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Philip Arestis & Malcolm Sawyer, 2001. "Will the Euro Bring Economic Crisis to Europe?," Palgrave Macmillan Books, in: Philip Arestis & Michelle Baddeley & John McCombie (ed.), What Global Economic Crisis?, chapter 5, pages 78-103, Palgrave Macmillan.
    2. Arestis, Philip & McCauley, Kevin & Sawyer, Malcolm, 2001. "An Alternative Stability Pact for the European Union," Cambridge Journal of Economics, Oxford University Press, vol. 25(1), pages 113-130, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Arestis, Philip & McCauley, Kevin & Sawyer, Malcolm, 2001. "An Alternative Stability Pact for the European Union," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 25(1), pages 113-130, January.
    2. Philip Arestis & Malcolm Sawyer, 2001. "Will the Euro Bring Economic Crisis to Europe?," Palgrave Macmillan Books, in: Philip Arestis & Michelle Baddeley & John McCombie (ed.), What Global Economic Crisis?, chapter 5, pages 78-103, Palgrave Macmillan.
    3. Jorg Bibow, 2001. "Making EMU Work: Some lessons from the 1990s," International Review of Applied Economics, Taylor & Francis Journals, vol. 15(3), pages 233-259.
    4. Oscar Bajo-Rubio & Carmen Díaz-Roldán, 2003. "Insurance Mechanisms against Asymmetric Shocks in a Monetary Union a Proposal with an Application to EMU," Recherches économiques de Louvain, De Boeck Université, vol. 69(1), pages 73-96.
    5. 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.
    6. Jakob de Haan & Helge Berger & David-Jan Jansen & Jakob de Haan, 2003. "The End of the Stability and Growth Pact?," CESifo Working Paper Series 1093, CESifo.
    7. Andrew Hughes Hallett & Laura Piscitelli, 1999. "EMU in Reality: The Effect of a Common Monetary Policy on Economies with Different Transmission Mechanisms," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 26(4), pages 337-358, December.
    8. De Grauwe, Paul & Piskorski, Tomasz, 2001. "Union-wide Aggregates versus National Data Based Monetary Policies: Does it Matter for the Eurosystem?," CEPR Discussion Papers 3036, C.E.P.R. Discussion Papers.
    9. Carlo Monticelli, 2000. "Structural Asymmetries and the Optimal Monetary Policy Instrument of the European Central Bank," Open Economies Review, Springer, vol. 11(1), pages 49-71, January.
    10. Dury, Karen & Pina, Alvaro M., 2003. "Fiscal policy in EMU: simulating the operation of the Stability Pact," Journal of Policy Modeling, Elsevier, vol. 25(2), pages 179-206, February.
    11. Hein, Eckhard & Truger, Achim, 2002. "European Monetary Union: Nominal convergence, real divergence and slow growth? An investigation into the effects of changing macroeconomic policy institutions associated with monetary union," WSI Working Papers 107, The Institute of Economic and Social Research (WSI), Hans Böckler Foundation.
    12. 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.
    13. Charles Wyplosz, 2003. "Le Pacte de stabilité atteint ses limites," Revue d'Économie Financière, Programme National Persée, vol. 71(2), pages 245-259.
    14. Michael C. Burda, 2001. "European Labour Markets and the Euro: How Much Flexibility Do We Really Need?," Palgrave Macmillan Books, in: Deutsche Bundesbank (ed.), The Monetary Transmission Process, chapter 7, pages 252-282, Palgrave Macmillan.
    15. Jérôme Creel, 2001. "Faut-il contraindre la politique budgétaire en Union monétaire ?. Les enseignements d'une maquette simulée," Revue de l'OFCE, Presses de Sciences-Po, vol. 77(2), pages 199-249.
    16. Fabrizio Balassone & Daniele Franco, 2000. "Public investment, the Stability Pact and the ‘golden rule’," Fiscal Studies, Institute for Fiscal Studies, vol. 21(2), pages 207-229, June.
    17. Yunus Aksoy & Paul De Grauwe & Hans Dewachter, 2014. "Do Asymmetries Matter for European Monetary Policy?," World Scientific Book Chapters, in: Exchange Rates and Global Financial Policies, chapter 13, pages 321-353, World Scientific Publishing Co. Pte. Ltd..
    18. Cornelius, Peter K. & Trimbur, Thomas, 2000. "Heterogeneous policy responses and the risk of monetary disintegration in Europe," Research Notes 00-1, Deutsche Bank Research.
    19. Willem H. Buiter & Clemens Grafe, 2004. "Patching up the Pact," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 12(1), pages 67-102, March.
    20. Fatas, Antonio & Mihov, Ilian, 2001. "Government size and automatic stabilizers: international and intranational evidence," Journal of International Economics, Elsevier, vol. 55(1), pages 3-28, October.

    More about this item

    JEL classification:

    • E - Macroeconomics and Monetary Economics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpma:0004029. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: EconWPA (email available below). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.