Process Of Monetary Integration Research Articles

Teaching and Learning About European Union

The Project we are introducing has as main objective to provide teachers and students with a summary and collection of data in web and multimedia format with interactive information about relevant topics of the European Union.The European Union is an international example in the study and analysis of the processes of economical, monetary and political integration. Our objective is to create an interactive platform where teachers and students can access to the basic information about the EU in an easy and intuitive way.In order to elaborate this material we have used free software. This web page has been made using the platform ex-learning. In addition, we have added other web resources 2.0 of free access, that let us make digital books with pdf – issue – to build time timelines (with dipity application), or transform power point presentation in flash (using “ispring free”). The target of this is to apply the available web tools in order to produce teaching material that can be more attractive and practical and simplify the task of searching information for teachers and researchers.

Should I Stay or Should I Go? Switzerland and the European Economic and Monetary Integration Process

The case of Switzerland appears to be unique with regard to the European Economic and Mo netary Integration Process which began in 1957: even though the country has cultivated close ties and growing links with the European Union (EU) over time, it does not desire full mem bership. If this situation of non-adhesive integration seems to be beneficial for Switzerland in many respects, it also presents some constraints. Such a position leads to a national dilemma for Switzerland with regard to the EU: should I stay or should I go? Thus we shall examine in this article the particularities, the advantages, and the constraints of the Swiss stance.

Poland on the Road to the Euro: How Serious is the Risk of Boom-Bust Cycles after the Euro Adoption? An Empirical Analysis

The goal of this paper is, firstly, to determine which structural characteristics of an economy make it more (or less) prone to macroeconomic booms and busts and, secondly, to empirically assess the risk of a boom-bust cycle in Poland after the euro adoption. We start from identifying booms and busts in private consumption and investment in fourteen 'old' EU member states and then we seek to explain the identified boom and bust series using panel probit and pooled probit models. We then use the estimated equations to assess the probability of booms and busts in Poland over the period 2004 to 2009. Our results suggest that credit developments have been the most important driving force of booms and busts in EU-14. The relevance of international capital flows as a boom-bust transmission channel and of the cyclical heterogeneity of countries which undergo a process of monetary integration is also confirmed. We also find evidence that the fiscal channel boils down to a crowding-out effect: a reduction in the general government expenditure 'makes room' for a boom in the private expenditure, and the reverse holds for busts. In turn, our results for Poland are inconclusive, which probably means that the models estimated for EU-14 are not adequate to predict the probabilities of booms and busts in this country.

Financial constraints and exports: an analysis of Portuguese firms during the European monetary integration

Financial constraints are a key determinant that hinders firms' ability to export. This paper analyses the nexus between these constraints and firms' engagement in international trade, as well as it explores the impact of the European monetary integration process upon firms' financial constraints. Therefore, we estimate cash to cash-flow sensitivities for different periods (1996-2000 and 2001-2004) and different groups of firms, according to their exporting and importing activity. Our results indicate that, depending on their international openness, the European monetary integration seems to have generally helped reducing the degree of financial constraints faced by Portuguese firms. Additionally, our findings suggest that rather than unconstrained firms self-selecting into exporting firms' constraints were reduced after they started exporting.

The Process of European Monetary Integration: A Comparison of the Belgian and Italian Approaches

This paper analyses and compares the roles which Belgium and Italy have played in the process of European monetary integration. It discusses Belgian and Italian attitudes towards European integration and EMU, exchange rate policies, key concepts of the Belgian and Italian EMU strategies and the concrete contributions made by Belgium and Italy. Overall, these two countries played an important and pace-setting role in the process of European monetary integration. They developed several creative and diplomatic proposals. Moreover, Belgian and Italian policy-makers often acted as policy entrepreneurs and proved to be skillful negotiators. The main difference is that Belgium has been a constant and consistent pace-setter in monetary matters, from the preparation of the Hague Summit to the elaboration of the EMS, the monetary chapter in the Single European Act and the realisation of EMU, whereas Italy was mainly active in the 1980s. This assessment of the Belgian and Italian contributions does not challenge the decisive impact of the Franco-German axis, but illustrates that EMU was a multilateral process. Furthermore, the paper shows how important it was for a country to achieve a sound economic performance, especially a stable exchange rate, in order to have influence on the European monetary scene.

Déficits en cuenta corriente en la Unión Económica y Monetaria Europea y crisis financiera internacional

La creación de la Unión Económica y Monetaria Europea (UEM) cambió el papel del saldo de cuenta corriente, tradicionalmente como equilibrio básico necesario para asegurar el crecimiento económico de largo plazo. La eliminación del riesgo cambiario y la facilidad para acceder a los mercados financieros internacionales, consecuencia de la integración financiera europea, han hecho que el déficit de cuenta corriente sostenible haya aumentado notablemente. Así, desde mediados de los noventa y, en especial, tras la implantación del euro, se ha asistido a un importante aumento en la dispersión de los desequilibrios de cuenta corriente de los países miembros de la UEM, como consecuencia, principalmente, del tamaño alcanzado por los déficits de cuenta corriente de Portugal, Grecia y España. Estos déficits podrían ser considerados una consecuencia natural y beneficiosa del propio proceso de integración económica, monetaria y financiera europea y que podrían ser absorbidos sin consecuencias económicas importantes para los países que los registran. Sin embargo, su tamaño y persistencia han provocado un rápido deterioro en su posición de inversión internacional, lo que impide el mantenimiento de la actual tendencia de deterioro y exige su corrección. El artículo analiza la evolución de los desequilibrios de cuenta corriente en la UEM, su interrelación con la integración monetaria y el especial impacto que la crisis financiera internacional está teniendo sobre los países que registran mayores déficits de cuenta corriente.

European monetary integration and persistance of real exchange rates

The aim of this paper is to analyze whether the persistence properties of the European real exchange rates changed when their currencies joined the euro or during the monetary integration process. More specifically, we investigate whether, as a result of the single currency or the previous macroeconomic stability, nominal price rigidities have decreased and the persistence of real exchange has fallen. We test for stationarity against a change in the integration order on different competitiveness measures during the period that runs from the middle of the seventies to nowadays. The results show that the real exchange rates of the European periphery (Spain, Italy, Portugal, Greece and Finland) underwent a change in their order of integration from I(1) to I(0) at some time around the middle of the 1990s. On the other hand, the real exchange rates of the Central European countries, with a greater stability in the 1980s and 1990s, changed their integration order earlier, if at all, mostly during the 1980s. So, the euro seems to have had, on the whole, little influence on the persistence of real exchange rates. Only for a few countries do our findings detect a significant decrease in persistence related with the nominal convergence process.

Asian Monetary Integration in Recent Economic Debates

Recently, after the financial and currency crises that hit Asian economies at the end of last millennium and the foundation in Europe of the single currency, a renewed interest towards integration processes in Asia has grown (Whyplosz 2001). In the last four years a vivid scientific debate on such topic has taken place on the main international economic journals. Such debates are relevant to the theory of federalism for at least two reasons. First, in the theory and history of federalisation processes, monetary integration plays an important role as money is often considered a public good which has to be provided and safeguarded by a public institution representing a collective sovereignty and legitimated through democratic citizenship. Federalism is based on the struggle against the absoluteness and exclusiveness of national sovereignty and monetary integration provides an institutional economic tool to overcome exclusive national sovereignty and foster political integration. The second reason is that from a strategic point of view, active political federalism has always advocated the creation of continental groups of countries in order to better and more realistically struggle for greater democratic legitimacy in the world. Asian monetary integration may therefore represent a further step towards this scenario of a multi-polar geography of power worldwide. But the institutional approach, where the process is guided by political institutions to provide a collective public good is not the only approach to monetary integration. Integration has been (Vaubel 1984a; b) - and still is (Buchanan 2004) - considered also as a (more or less) spontaneous process whereby markets attempt to gain greater efficiency, through the decrease of transaction costs and policy costs associated with different currencies. In this case the institutional content of the integration process can be minimized (in some cases to zero, in others to a very broad constitutional arrangement). Three main questions have historically emerged in this field and are dealt in this work: a) how to cut the world in order to create optimum currency areas and, in the specific case we are examining, which countries to “invite” into a monetary integration process in Asia; b) what model of integration is most suitable for the selected countries and what institutions are required; c) how to manage the transition towards the target.

Credit booms, monetary integration and the new neoclassical synthesis

Credit to the private sector has risen rapidly in many new Central and Eastern European EU Member States (nMS) in recent years. The lending boom has recently been particularly strong in the segment of loans to households, primarily mortgage-based housing loans, and in those countries that operate currency boards or other forms of hard pegs. The main aim of this paper is to propose a conceptual framework to analyze the observed developments with a view to exploring some policy implications at a stage in which these countries are preparing for their prospective integration with the euro area. To achieve this, we first use a stylized new neoclassical synthesis (NNS) framework, which has recently been advanced by Goodfriend [Goodfriend, M., 2002. Monetary policy in the new neoclassical synthesis: A primer, Federal Reserve Bank of Richmond, July.] and Goodfriend and King [Goodfriend, M., King, R., 2001. The case for price stability. NBER Working Paper 8423]. We then discuss the implications of the NNS model for credit dynamics and ensuing monetary policy challenges. Specifically, we emphasize consumption smoothing as an important channel of the observed credit expansion and we show how it is related to and how it affects the monetary policy making in MS. In doing so, we place our discussion in the context of the monetary integration process in general and the nominal convergence process in particular.

Vom EWS zum Euro: DM und Schilling Hand in Hand (From the EMS to the Euro: DM and Schilling Hand in Hand)

The focus of this paper is on the similarities and differences of German and Austrian monetary and exchange rate policies, which are analysed against the background of the economic forces which eventually resulted in the creation of the European Monetary Union. The frontline of the struggle for achieving monetary integration in Europe ran between Germany and France, which enhances the role of the D-Mark as an anchor currency not just for Austria, but for Europe at large. In contrast to the very active role of Germany in the monetary integration process, Austria remained virtually passive. However, utilising her experience with a hard currency policy, Austria made an essential contribution to the stability of the system as a whole. Given a history of just a few years, the stability of, and the future risks for, the European monetary system are elaborated.

The Process of Monetary Integration in the SADC Region*

The African Union has agreed, in principle, to implement monetary union and a single currency in Africa by 2021. This would be based upon the prior formation of regional monetary unions, including one in the SADC region. This article considers the economic prerequisites and implications for a monetary union and, in the light of this, whether a SADC monetary union is feasible. After reviewing the existing monetary union within SADC (the rand-based Common Monetary Area) and current SADC macroeconomic convergence initiatives, the article examines the extent to which key economic and monetary variables – inflation, interest rates and exchange rates – are converging within SADC. It concludes that there is a core ‘convergence’ group comprising the CMA countries – South Africa, Lesotho, Namibia and Swaziland – plus Botswana, Mauritius, Mozambique and Tanzania whose macroeconomic performance satisfies some of the criteria for monetary union. The remaining SADC countries – Angola, DRC, Malawi, Zambia and Zimbabwe – make up a ‘non-converging’ group that cannot yet be considered potential candidates for monetary union. However, even within the convergence group, countries remain far from satisfying the other prerequisites for monetary union, including significant intra-regional trade, and full capital and labour mobility. There are also major political constraints, making the AU monetary union proposals and timetable highly ambitious.

The impact of EMU on the equity cost of capital

This paper shows that during the 1990s the process of gradual economic and monetary integration, which eventually led to EMU, also resulted in a reduction in the equity cost of capital. A similar reduction was not present in the three EU countries which chose not to enter the Eurozone. There was also a strong convergence in the cost of equity across the different countries within a given industrial sector, but little convergence across the different sectors of a given EMU country. An implication for portfolio management is that country effects are becoming less important and sectoral effects are becoming more important.

Modelling a Regional Economic System: The Case of Lombardy

Baussola M. (2007) Modelling a regional economic system: the case of Lombardy, Regional Studies 41, 19–38. During recent years the demand for quantitative economic investigation to be used for policy analysis has grown rapidly. In addition, the European economic and monetary integration process has increased the economic impact of regional economies, thus calling for analytical instruments aimed at supporting the decision-making process. A regional econometric model of Lombardy's labour market was set up in which both labour demand and supply are endogenously determined and, thus, unemployment is determined by their interaction. Therefore, labour demand in both the industrial sector and in private services is modelled, while labour supply is split into two components that define, respectively, the participation rate and self-employment. The model simulations evaluate the response of the regional labour market, in comparison with the national one, to exogenous shocks depending on shocks in either demand or supply. The intersectoral difference highlights the fact that industry, although declining in terms of employment, still maintains a crucial role in generating employment multiplier effects, which in turn may reduce unemployment. This evidence has important policy implications as it suggests that industrial policy may play a crucial role in stimulating labour demand and supply, and through this route the whole regional growth process. Baussola M. (2007) La modélisation d'un système économique régional: étude de cas de la Lombardie, Regional Studies 41, 19–38. On cherche à construire un modèle économétrique régional du marché du travail de la Lombardie au sein duquel la demande et l'offre de main-d'oeuvre sont déterminées de façon endogène. Les simulations évaluent la réponse du marché du travail aux chocs exogènes sur le plan régional, plutôt que du point de vue national, par rapport à la demande ou à l'offre. La différence intersectorielle souligne que l'industrie joue toujours un rôle clé dans la production des effets multiplicateurs sur l'emploi qui, à leur tour, pourraient réduire le chômage. Les preuves ont des implications pour la politique, parce que cela laisse supposer que la politique industrielle pourrait jouer un rôle capital dans la stimulation du processus de croissance régionale sous tous ses aspects. Demande de main-d'oeuvre Offre de main-d'oeuvre Modèles économétriques régionaux Simulation Baussola M. (2007) Modellierung eines regionalen Wirtschaftssystems: der Fall der Lombardei, Regional Studies 41, 19–38. Wir errichten ein ökonometrisches Regionalmodell des Arbeitsmarkts in der Lombardei, in dem sowohl die Nachfrage als auch das Angebot an Arbeitskräften endogen festgelegt werden. Durch die Modellsimulationen wird die Reaktion des regionalen Arbeitsmarkts auf exogene Störungen von Angebot oder Nachfrage untersucht und mit dem landesweiten Markt verglichen. Der Unterschied innerhalb des Sektors verdeutlicht die Tatsache, dass die Industrie auf dem Arbeitsmarkt weiterhin eine zentrale Rolle bei der Erzeugung multiplikatorischer Effekte spielt, welche wiederum zum Abbau der Arbeitslosigkeit beitragen können. Dieser Nachweis hat wichtige Auswirkungen auf die Politik, denn er legt den Schluss nahe, dass die Industriepolitik eine zentrale Rolle zur Förderung des Wachstums in der gesamten Region spielen kann. Nachfrage nach Arbeitskräften Angebot an Arbeitskräften Ökonometrische Regionalmodelle Simulation Baussola M. (2007) Modelando un sistema de economía regional: el caso de Lombardía, Regional Studies 41, 19–38. Hemos creado un modelo econométrico regional sobre el mercado laboral de Lombardía donde la oferta y la demanda en el mercado laboral se determinan según un modelo endógeno. En las simulaciones del modelo se evalúa la respuesta del mercado de trabajo regional a choques exógenos en función de cada choque en la oferta o la demanda, comparándolo con el mercado nacional. La diferencia intersectorial destaca el hecho de que la industria sigue manteniendo un papel crucial para generar con efectos multiplicadores de empleo que, a su vez, pueden reducir el desempleo. Esta evidencia tiene importantes implicaciones políticas dado que sugiere que la política industrial podría desempeñar una función determinante en el estímulo del proceso de crecimiento regional en su conjunto. Demanda laboral Oferta laboral Modelos econométricos regionales Simulación

The Costs and Benefits of Monetary Integration Reconsidered: towards Value-Added Based Openness Measures

This study re-assesses regional integration by taking new measures for the degree of openness into account. The value-added based economic integration (VEI) model which improves on traditional economic integration models forms the core of these openness indicators. We show that a shift from the usual proxies of the gross economic integration (GEI) model towards those of the VEI model leads to a decrease of the realized degree of economic integration. Hence, the costs (benefits) are higher (lower) for a country from joining a fixed exchange rate area as supposed by the standard GEI model. From this perspective, the outcomes based on the traditional GEI model tend to overestimate the potential success of a given monetary integration process. More specifically, even a revision of the recommendation for a country to participate in a single currency area might be a consequence. Finally, empirical estimates of these new openness measures are delivered for more than twenty countries.

Correlation dynamics in European equity markets

We examine correlation dynamics using daily data from 1993 to 2002 on the five largest Euro-zone stock market indices. We also study, for comparison, the correlations of a sample of individual stocks. We employ both unconditional and conditional estimation methodologies, including estimation of the conditional correlations using the symmetric and asymmetric DCC-MVGARCH model, extended with the inclusion of a deterministic time trend. We confirm the presence of a structural break in market index correlations reported by previous researchers and, using an innovative likelihood-based search, we find that the it occurred at the beginning the process of monetary integration in the Euro-zone. We find mixed evidence of asymmetric correlation reactions to news of the type modelled by conventional asymmetric DCC-MVGARCH specifications.

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)

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 & Sons, Ltd.

Regional Monetary Integration in the Member States of the Gulf Cooperation Council

The Gulf Cooperation Council (GCC) plans to introduce a single currency by 2010 in its six member states, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. This paper focuses on selected macroeconomic and institutional issues and key policy choices which are likely to arise during the process of monetary integration. The main findings are that (i) a supranational GCC monetary institution is required to conduct a single monetary and exchange rate policy geared to economic, monetary and financial conditions in the monetary union as a whole; (ii) GCC member states have already achieved a remarkable degree of monetary convergence, but fiscal convergence remains a challenge and needs to be supported by an appropriate fiscal policy framework; and (iii) there is currently a high degree of structural convergence, although this is expected to diminish in view of the process of diversification in GCC economies, which calls for adequate policy responses. JEL Classification: E5, E52