European monetary union : transition, international impact, and policy options : with 50 figures and 31 tables

Paul J. J. Welfens European monetary union has been discussed for more than three decades and is likely to be realized in 1999. One may anticipate generous interpretations of the fiscal convergence criteria. Such generosity consistent with the Maastricht Treaty might impair the credibility of the ECB and the stability of the Euro, respectively, despite the fact that inflation is a monetary phenomenon and has little to do with government deficits, unless they were financed via the printing press, which is excluded in the Maastricht Treaty. The European Commission's forecast of spring 1997 suggests that Italy will have problems in joining the EMU starter group as the is expected to be 3. 2% in 1997 and even 3. 9% in 1998. A Italian deficitlGDP ratio fully developed EMU group (with all 15 cowltries included) would represent 38% of the OECD GDP, slightly higher than the U. S. with 33% (Japan 21%). The exports/GDP ratio of EU countries is 30%, the ratio with respect to exports outside the EU would be 10% (Japan, U. S. 8%). The share of the U. S. dollar in international currency reserves fell from 67% to 40% in 1995, while the share of European currencies increased from 13% to 37%. Prior to the EMU, market participants have to anticipate whether a transition to 1999 will bring windfall losses or gains in various bond markets. Front Matter....Pages I-X Introduction....Pages 1-10 Front Matter....Pages 11-11 EMU and Long Interest Rates in Germany....Pages 13-70 EMU and Outsiders: Fixed versus Flexible Exchange Rates....Pages 71-130 Front Matter....Pages 131-131 Foreign Exchange Vehicles Before and After EMU: From Dollar/Mark to Dollar/Euro?....Pages 133-159 Does a Core-Periphery Regime Make Europe into an Optimal Currency Area?....Pages 161-234 Competitive Neutrality of Monetary Policy Instruments for EMU....Pages 235-268 Front Matter....Pages 269-269 Self-Fulfilling Public Debt Crises....Pages 271-295 EU Labor Markets Inside and Outside the Monetary Union....Pages 297-330 Political Economy of EMU and Stabilization Policy....Pages 331-399 Front Matter....Pages 401-401 Deficits, Debts and the Stability Pact....Pages 403-414 Preparing for EMU....Pages 415-417 Doctrinal Amendments for a Functional EMU ? A Few Reminiscences of Economic History....Pages 419-426 Front Matter....Pages 427-427 Compromise Should not Undermine the Credibility of the Euro Currency....Pages 429-432 EMU: A German Viewpoint....Pages 433-438 EMU: A Bank’s Perspective....Pages 439-441 Opportunities and Risks Associated with European Monetary Union....Pages 443-447 Back Matter....Pages 449-469 The EU is heading towards a monetary union which has both benefits and risks for the Community but will also affect countries outside of Europe. Crucial transition problems, economic adjustment in financial markets and labor markets as well as theoretical and empirical issues of monetary integration are analyzed. The book also focuses on interest rate effects, the role of volatility of money supply growth and exchange rate instability. Issues of monetary and fiscal policy and the political economy of monetary integration are evaluated The book presents information on the process towards monetary union in Europe. It includes innovative research and new empirical analysis.