European Monetary Integration Research Articles

The euro: a concise introduction to European monetary integration

Tackling the alphabet soup of European Union treaties, structures, and policies, this straightforward introduction demystifies the European Economic and Monetary Union (EMU). Hosli first traces the history of monetary integration in Western Europe and discusses the political and economic factors that led ultimately to the establishment of EMU and the euro. Then, in language accessible to the nonspecialist, she explains how it actually works. Ranging from institutions to performance to the impact of the euro both within Europe and on the international monetary system, she provides a welcome primer on this new phenomenon in the global political economy.

La réforme du système administratif Portugais : new public managementou Etat néo-wébèrien ?

<titre>The reform of the Portuguese public administration&#160;: New Public Management or Neo Weberian State&#160;? </titre> The article analysis the recent process of reform undergone by the Portuguese public administration, begun in 2004 under the Social democrat government and continued in 2006 under the Socialist government. It acknowledges that the reform introduces aspects of managerialism, but sustains that the concept of &#8220;neo-Weberian state&#8221; (developed by Christopher Pollitt and Geert Bouckaert) describes more adequately than that of new public management the features of the Portuguese Administration as shaped by this reform. The reform is situated in a context of financial pressure resulting from the need to comply with the requirements of the Growth and Stability Pact in the context of European monetary integration. However, some of its measures can only be fully understood in the framework of the evolution of Portuguese public Administration, since they are directed at tackling specific dysfunctions that resulted from changes occurred in the three decades that preceded. A brief look at this evolution will identify some of the persistent problems that the current reform of the public Administration sought to alleviate. The article gives an account of the measures adopted, underlines the influence of managerialism (as well as of contractualism, less influential in this reform) but also the Weberian traits that persist, demonstrating that the reforms of 2004-2006 have not inscribed in the Portuguese public administration characteristics that could be fully captured by the concept of new public management. Furthermore, it underlines the bias of the reform program of 2006 towards reducing the number of administrative structures and addresses the question of whether this organic restructuring implies a reduction of the welfare functions performed by the State. It stresses the complexity of the question posed and the fact that a possible answer given on the basis of the analysis undertaken, is a limited one. Nevertheless, it argues that the reform is directed mainly at the redesign and reallocation of formal functions within the structure of the Administration (executive functions, consultative functions, management of resources), not resulting necessarily in a substantial reduction of welfare state functions. In doing so, it acknowledges the normative conception of the State underlying the reform and the possible need to review this conclusion in light of further developments.

Interests and Identity in European Monetary Integration: France and Britain

Interests and Identity in European Monetary Integration: France and Britain

European monetary integration : from the beginnings to the EMS crisis of 1992-93

In the world of Bretton Woods exchange rate system, monetary policy played a secondary and subservient role, which in the case of European integration was strengthened by a predominant role of politics. Therefore, the first institutional arrangements at the beginning of the European monetary integration process served a set of practical goals. But changing global economy as well as changing politics of the European government set new goals for monetary policy coordination, which finally resulted in the origin of the European Monetary System. The EMS lasted for the next 14 years, until liberalizing financial markets and German unification led to the most severe crisis in the history of European monetary integration. As a decision concerning the pace and the path of monetary integration was an outcome of negotiations between main adversaries (Germany and France), it is crucial to look at the methodological context of the economist-monetarist discussion which set a mark on the institutional setup of the European monetary policy. (original abstract)

European monetary integration : from the beginnings to the EMS crisis of 1992-93

In the world of Bretton Woods exchange rate system, monetary policy played a secondary and subservient role, which in the case of European integration was strengthened by a predominant role of politics. Therefore, the first institutional arrangements at the beginning of the European monetary integration process served a set of practical goals. But changing global economy as well as changing politics of the European government set new goals for monetary policy coordination, which finally resulted in the origin of the European Monetary System. The EMS lasted for the next 14 years, until liberalizing financial markets and German unification led to the most severe crisis in the history of European monetary integration. As a decision concerning the pace and the path of monetary integration was an outcome of negotiations between main adversaries (Germany and France), it is crucial to look at the methodological context of the economist-monetarist discussion which set a mark on the institutional setup of the European monetary policy. (original abstract)

Rolf J. Langhammer and Lúcio Vinhas de Souza (eds). Monetary Policy and Macroeconomic Stabilization in Latin America. Heidelberg: Springer-Verlag. 2005. ix+254 pages. Hardback. Price not given.

Monetary Policy plays a crucial role in macroeconomic stabilisation of a country. Latin American countries have faced successive waves of economic instability causing hyper-inflation and currency and financial crises leading to losses in output. This book is a collection of papers presented at the conference on “Monetary Policy and Macroeconomic Stabilization in Latin America”, held at the Kiel Institute for World Economics (IFW), in Kiel, Germany, on September 11-12, 2003. Well-known speakers from major multilateral policy institutions and the monetary authorities of Latin American economies participated in this conference. Graphs and tables throughout the book make for easy understanding of the main findings, as the book focuses on the recent experience of Latin American economies with designing, announcing, and implementing monetary policies with different internal and external anchors. It deals with the exposure of real exogenous shocks, high dollarisation, regulated and segmented labour market, inappropriate policies and monetary institutions, and unrest from deep financial and currency crises. The book draws lessons from European monetary integration for Latin America, and examines the role of financial integration to help reduce the systematic shocks in Latin America.

European Monetary Integration

European Monetary Integration

The euro and its central bank: getting united after the union

History and analysis of European monetary integration and related economic, financial, monetary, and international political issues: an accesible guide. This history and analysis of the euro and the European Central Bank traces the process of European monetary integration from its beginnings as a utopian vision in the aftermath of World War II through the establishment of a single currency managed by a central bank. Tommaso Padoa-Schioppa, a central banker who has been involved in the making of European monetary unification since 1979, offers an accessible guide to the euro and the European Central Bank for scholars, students, and the general reader, discussing the related economic, financial, monetary, and international political issues. In the process he also provides an overview of central banking in general and the multiple activities of a central bank; as the case of the European Central Bank illustrates, central banking involves not only monetary analysis and policy but much else, including banknote printing and handling, market operations, payment systems, bank supervision, and coordinating with other public institutions.Padoa-Schioppa begins with the historical background of European monetary integration, starting with the 1957 Treaty of Rome, which lay the foundation for the Common Market, and covering the 1992 Maastricht Treaty, the development of an anchor currency, and the euroskepticism of the U.K. Subsequent chapters are devoted to economic policy, monetary policy, the euro as unifier in the financial system, the payment system, the euro as an international actor outside euroland, and the challenges ahead for the still relatively young project of European monetary integration.

China's role in East‐Asian monetary integration

AbstractMost proposals for East‐Asian monetary cooperation assign a special role to the Japanese yen as anchor currency. We focus on the potential role of the Chinese renminbi. Since China will assume the role of the dominant economy in the region and become a more important destination for Asian products than Japan eventually, this development assigns a special role to the Chinese currency. It is rather unlikely that the renminbi will assume a dominant role immediately, but a comparison with the European monetary integration process suggests designing a system where the relative weight of the renminbi increases gradually. Copyright © 2005 John Wiley &amp; Sons, Ltd.

Denmark and european monetary integration: Out but far from over

Denmark is not likely to introduce the European single currency in the foreseeable future. At present, Danish politicians and the country’s population do not consider the issue of the euro to be of primary importance for the development of the Danish society and polity. Despite (or maybe because of) the fact that the country is a euro‐outsider it is performing quite well economically and politically. Thus, Denmark may be an ‘out’ country but it is definitely not ‘over’ and done with as regards European monetary integration. Furthermore, the present situation is not historically unprecedented since Danish monetary authorities have traditionally not been used to having monetary sovereignty to any significant extent. This implies that Danish policymakers have found a number of indirect means to influence monetary policy‐making in the euro‐area.

EMU and the stability and volatility of foreign exchange: Some empirical evidence

Abstract How has the European monetary integration, with the creation of the EMU, affected the stability and volatility of foreign exchange? In order to answer this question, stability and volatility measures are defined and calculated. We then use these to investigate the changes in the stability and volatility of 16 European currencies, and in the volatility of the shocks to these currencies. The stability measures are based on smooth Lyapunov exponents, while the volatility measures utilize variances. The results indicate that when most of the currencies become more stable, a majority of them also become less volatile. For example, following the agreement of the Maastricht Treaty most currencies became more stable and less volatile, whereas they became less stable and more volatile when the Danish public voted against the treaty. Finally, there is no empirical support for the view that a decision to step aside from a closer monetary collaboration has a negative effect on the stability of the currency.

Towards European Monetary Integration: The Evolution of Currency Risk Premium as a Measure for Monetary Convergence Prior to the Implementation of Currency Unions

We assess monetary convergence preceding the implementation of the European Monetary Union (EMU) through Kalman filtering estimates of the risk premium of eleven forward exchange rates of European and non-European currencies. Since all participating currencies are in effect identical from inception of a currency union, the convergence process to such an identical status should be reflected in the participating currencies' risk premiums prior to monetary union implementation. Starting from this assumption, we show the paths followed by the participating currencies towards monetary union. We find that the co-movements of risk premiums among the preceding European Monetary System (EMS) currencies differ across time periods but display a tendency to convergence to the German mark’s risk premium up to EMU implementation. The paper also shows a clear pattern of asymmetry of the participating currencies in relation to the German mark. JEL Classification: F02, F31, F33, F36, G15, G18

Financial Market Integration in a Wider European Union

EU enlargement rests on the proven success of European unification. European monetary integration and the introduction of euro are probably the best examples of integration. The EU financial sector has been going through a large restructuring program in the last decades. There was a continuous wave of deregulation since the late 1980s, when the Single Market programme with minimal harmonisation and home country control was implemented in successive periods for banking, insurance and the securities markets. The accession of new members poses huge challenges on the European Union and the countries from Central and Eastern Europe (CEEC. Similarities in economic histories and experiences, as well as comparable methods applied to build the market economies, led to creation of analogous structures and institutions in the CEEC. This was also true for the development of the financial sector. The paper will then investigate the most important characteristics of the financial architecture and will analyse the impact of closer integration of financial sectors in CEEC and EU countries. It will briefly review the developments which have taken place in the financial sector of both groups of countries to provide the background for the later analysis of the expected effects of integration in both old and new member states. Furthermore, it will make a formal assessment of the actual increase in financial market.

The euro, the enlarged EU and Asia

On January 1st 2002, euro coins and notes were introduced in the twelve countries of the European Union. The successful introduction of the euro was the last stage of a long process, officially called the Economic and Monetary Union (emu). And this process cannot be understood correctly without placing it in the context of the even longer process of European Integration. This paper explains what the euro is. It looks back briefly at the post-war history of monetary integration in Europe. Then we focus on the emu and explain why and how the euro was successfully introduced. We discuss whether the eurozone is an Optimum Currency Area, whether and how that matters, and the costs and benefits of the euro. Finally, we touch upon the prospects of the new EU members adopting the euro, then discuss the implications of emu in particular and European Integration in general, for Asia.

France and Italy's Policies on European Monetary Integration: A Comparison of ‘Strong’ and ‘Weak’ States

This work compares France and Italy's policies on European monetary integration from the early 1970s to the late 1990s, arguing that their very different 'state structures', encompassing domestic structures and social normative order, determined their different policies in three ways. In France, the monolithic state structure produced coherent macroeconomic policies that were a crucial condition for taking part in the process of European monetary integration. In Italy, the fragmented 'archipelago' configuration of the state resulted in incoherent macroeconomic policies, which challenged the participation to European monetary agreements. Second, state structures determined how national policy preferences on EMU were formed domestically, and were fed into the EU process. Whereas France generally presented a unified position, decided by the political authorities and pursued assertively, Italy's stance was often internally divided, and undermined by domestic economic and political weaknesses. Third, state meta-structure promoted different visions for EMU, whereby the French authorities, largely favouring an intergovernmental framework, objected to central bank independence and attached great importance to the European and global power dimension of the project. The Italian authorities, instead, supported a supranational framework for EMU, and were primarily concerned about its domestic impact, first and foremost economic convergence.

The French commitment to European monetary integration: A review of the two EMS crises (1981–83, 1992–93)

This paper focuses on the process of exchange rate management during the two European Monetary System(EMS) crises, in 1981–83 and 1992–93, and examines the factors which led the French governments to adhere to the EMS. France's strong franc (franc fort) policy is a useful test case for maintaining national commitment to European monetary integration. The origin of the franc fort policy can be traced back to the exchange rate crisis of 1981–83. By actively supporting European institutions and emphasizing the emergence of a strong and united European common currency, France discovered the way to bolster confidence in her economic policy. Beyond this focal point, political justification and economic rationality became mutually reinforcing, configuring French national preference in European monetary integration. The response of the French government to the EMS crisis of 1992–93 was more consistent compared to the response to the 1981–83 crisis, and reflected the accumulation of loyalty to European monetary integration. This loyalty, however, was made neither from purely economic calculation nor out of normative commitment French European monetary policy reflected the interaction between domestic politics and European monetary integration. The French commitment to the franc fort also was based on domestic political bases such as the existence of a core policy group, a centralized policy‐making structure, and an issue linkage between the franc fort and European integration.

Italy's policy towards European monetary integration: Bringing ideas back in?

This article deals with Italy's policy towards European monetary integration over the period 1978-99 addressing the questions of whether, how and which 'ideas' influenced Italian policy-makers' choices. This theoretically informed and empirically grounded analysis argues that cognitive and normative elements, encompassing both 'economic ideas' and 'foreign policy beliefs', bring significant added value in explaining the 'Italian road' to economic and monetary union (EMU). Secondly, economic ideas alone do not explain Italian policy-makers' choices and, whenever different cognitive factors pulled in opposite directions, it was pro-European foreign policy beliefs that eventually prevailed in shaping policy. Thirdly, both foreign policy beliefs and economic ideas represent an intriguing case of the Europeanization of the Italian élites and the impact that such processes had on the trajectory of the country within the European Union.

Realigning Interests: Crisis and Credibility in European Monetary Integration

Realigning Interests: Crisis and Credibility in European Monetary Integration

EMU Strategies: Lessons from Past Experience in View of EU Enlargement

This paper, after reviewing briefly the early steps of European monetary integration and key elements of the EMU project as reflected in the Treaty of Maastricht, analyses the monetary integration strategy and convergence experience of member states, in particular that of Greece, in the 1990s which led to the adoption of the euro. From this analysis, a number of lessons are drawn which may be useful, in the light of enlargement, to future candidates for euro area membership in designing their economic and monetary convergence strategies. The paper concludes that the existing Community institutions, rules and mechanisms provide a helpful framework to guide the convergence effort of accession countries towards EMU and ensure the implementation of sound economic policies thereafter.

Exchange Rate Regimes and Volatility: Comparison of the Snake and Visegrad

Exchange rate stability was defined as one of the prerequisites for monetary integration in Europe. In this paper, we analyze recent developments in the volatility of exchange rates of the Central European countries (the Visegrad Group) and a selected group of European Union countries (the Snake) participating in the former European Monetary System. We compare volatilities in the currencies of both groups under specific exchange rate regimes using two different approaches to modeling exchange rate volatility: squared returns parametric model and GARCH. Both methods provide identical results for the currencies of the Visegrad group: an increase in volatility after a floating exchange rate regime was introduced. The case of the Snake countries exhibits mixed results for two currencies and a concurring result for the others: a decrease in volatility. In one case we are left with an insignificant coefficient. We consider the results as robust and suitable for policy making decisions.