The paper shows that the primacy of politics over economics in this decision could have serious consequences concerning the … Expand. The paper starts from the observation that the theoretical foundations of the EMU are largely outdated and European institutions have shown a number of faults.
These can be summarized in the fact … Expand. Comparison of business fluctuations in Latin America: an overview. The paper deals with the macroeconomic behavior of Argentina, Bolivia, Brazil, Chile, Paraguay and Uruguay for the period Its aim is twofold.
First, to determine whether their economic … Expand. View 1 excerpt, cites background. This paper reviews the recent literature on monetary policy rules. We exploit the monetary policy design problem within a simple baseline theoretical framework.
We then consider the implications of … Expand. Taking the business cycle's pulse to some Latin American economies. In the past decades, much work has been geared toward solving the problem of time inconsistency in monetary policy and analyzing the coordination problem between fiscal and monetary policy. This … Expand. Along with globalization of trade and finance has come a certain globalization of money.
Some countries have adopted monetary unions and currency boards; others increasingly use international … Expand. The debate about a European Monetary Union EMU revolves mainly about two issues: the costs of the loss of a national policy instrument, in the form of stabilization and revenues of seigniorage, and … Expand. The monetary policy framework is yet to be decided, but is likely to involve either money or … Expand. Economic and Monetary Union in Europe.
The European Council's Maastricht Agreement maps out a precise route to monetary union and the eventual introduction of a common currency. My discussion begins with a look at the general arguments … Expand. Establishing a Central Bank. This may not just be a small sample problem, since the estimated coefficients actually appear lower for the first dozen or so observations in the sample see top right charts showing coefficients and standard errors.
Only in the case of FRA10y does the graph suggest reasonable parameter constancy across the event groups according to which the samples were ordered. While imprecise estimations preclude the detection of a structural break which would distinguish the events from later events, the evidence in favor of a true positive relationship between GER10y and the other market variables for the early part of the sample is much weaker than over the whole sample.
The main result in this paper is that German bond yields appear to react to events affecting the probability that EMU will in fact happen over the medium term in the same , rather than the opposite direction as French, Belgian, Spanish, Italian and ECU bond yields. In most cases, the hypothesis of a true negative relationship can be rejected at the five percent level. We also find that the apparent positive association between German and other European bond yields in response to events affecting the probability of EMU is mainly driven by the way German bonds react to EMU related events after —i.
For this early event subset, the reactions of German yields are essentially uncorrelated with the reactions of other European yields. This suggests a change in the way German yields reacted to EMU related events. Initially, German bond markets seem fairly indifferent to events with large implications for EMU, showing very little reaction to events such as the Maastricht agreement itself the first Danish referendum or the Irish referendum—in sharp contrast to the behavior of bond yields elsewhere in Europe.
Eventually, however, German bond markets begin reacting to EMU related events in line with the reaction of other European bond markets. Two alternative interpretations are consistent with these findings.
One is simply that the EMU process has put no pressure on German yields, and that German bond markets, if anything—perhaps after a short period of indifference following the Maastricht agreement—are happy with the idea of European monetary union.
Maybe German markets expect the European Central Bank to be as tough on inflation as the Bundesbank, or perhaps they expect lower real interests under EMU for example, as a result of the application of the Maastricht criteria which would offset slightly higher inflation rates under the ECB. Under this interpretation, one would need to look elsewhere for explanations why German yields were higher than U.
On the other hand, the results presented still allow for one interpretation in which the EMU process as a whole might have raised the level of German yields, even if the EMU hypothesis as defined in the introduction and Section II is rejected.
Markets may not like the idea of EMU per se , but conditional on the EMU process having been initiated , prefer the successful completion of this process to the disruptions which would ensue if the process were called off. In this interpretation, German yields might well be lower now if the Maastricht agrement had never been signed, or had not included a commitment to a single currency.
Yet, after this fact-or at least after German markets became aware of the disruptive implications of a failure of the EMU process-one would observe German yields rising in reaction to events which threaten the process, and falling at events that enhance it.
This idea has some appeal not only as a logical possibility but also in view of the indifference of German yields to EMU related events which we found early on in the sample. As described above, the behavior of German bond markets in reaction to EMU related shocks seems to undergo a change either in the late or mid , depending on the right hand side variable we use to measure these shocks.
This happens to coincide with the timing of the two ERM crises. Specifically, these crises may have led to the perception that a plain and simple return to the old EMS was no longer feasible. While one cannot tell which of these two interpretations is right, distinguishing between the two may be interesting primarily from the perspective of economic history. As to the present, the results of this paper are unambiguous: German bond markets seem to prefer the successful completion of the EMU process as envisaged by Maastricht and subsequent EU summits to the perceived alternatives if the third stage is not attained.
All Rights Reserved. Topics Business and Economics. Banks and Banking. Corporate Finance. Corporate Governance. Corporate Taxation. Economic Development. Economic Theory. Economics: General. Environmental Economics. Exports and Imports. Finance: General. Financial Risk Management. Foreign Exchange. Industries: Automobile. Industries: Energy.
Industries: Fashion and Textile. Industries: Financial Services. Industries: Food. Industries: General. Industries: Hospital,Travel and Tourism. Industries: Information Technololgy. Industries: Manufacturing. Industries: Service. Information Management. International Economics. International Taxation. Investments: Bonds. Investments: Commodities. Investments: Derivatives. Investments: Energy. Investments: Futures. Investments: General.
Investments: Metals. Investments: Mutual Funds. Investments: Options. Investments: Stocks. Islamic Banking and Finance. Money and Monetary Policy. Natural Resource Extraction. Personal Finance -Taxation. Production and Operations Management. Public Finance. Real Estate. Sustainable Development.
Urban and Regional. Cloud Computing. Computer Science. Data Processing. Data Transmission Systems. Internet: General. Management Information Systems. Web: Social Media. Health and Fitness. Diet and Nutrition. Diseases: Contagious. Diseases: Respiratory. Business and Financial. Health Policy.
Natural Resources. Environmental Conservation and Protection. Natural Disasters. Political Science. Environmental Policy. Social Services and Welfare. Civics and Citizenship. National and International Security. Political Economy. Social Science. Women's Studies. Emigration and Immigration. Gender Studies. Poverty and Homelessness. Technology and Engineering. Mobile and Wireless Communications. Countries Africa. Burkina Faso. Cabo Verde. Central African Republic. Comoros, Union of the.
Congo, Democratic Republic of the. Congo, Republic of. Equatorial Guinea, Republic of. Eritrea, The State of. Eswatini, Kingdom of. Ethiopia, The Federal Democratic Republic of. Gambia, The. Lesotho, Kingdom of. Madagascar, Republic of. Mozambique, Republic of. Sierra Leone. South Africa. South Sudan, Republic of.
Tanzania, United Republic of. Asia and Pacific. Brunei Darussalam. China, People's Republic of. Cook Islands. Fiji, Republic of. Korea, Democratic People's Republic of. Korea, Republic of. Lao People's Democratic Republic. Marshall Islands, Republic of the. Micronesia, Federated States of. Nauru, Republic of. New Zealand. Palau, Republic of.
Papua New Guinea. Solomon Islands. Sri Lanka. Taiwan, Province of China. Timor-Leste, Democratic Republic of. Andorra, Principality of. Belarus, Republic of. Bosnia and Herzegovina. British Virgin Islands. Cayman Islands. Croatia, Republic of. Czech Republic. Estonia, Republic of. Faroe Islands. French Guiana.
French Polynesia. Holy See. Isle of Man. Kosovo, Republic of. Latvia, Republic of. Lithuania, Republic of. Moldova, Republic of. Netherlands, The. New Caledonia. North Macedonia, Republic of. Poland, Republic of. Russian Federation. San Marino, Republic of. Serbia, Republic of. Slovak Republic. Slovenia, Republic of.
Turks and Caicos Islands. United Kingdom. Wallis and Futuna Islands. Middle East and Central Asia. Afghanistan, Islamic Republic of. Armenia, Republic of.
Azerbaijan, Republic of. Bahrain, Kingdom of. Egypt, Arab Republic of. Iran, Islamic Republic of. The Outs are likely to be faced, sooner rather than later with deciding whether they are genuinely Pre-Ins. Greece, alone of the Outs, appears definitely to have made this decision. However, though the UK appears to be committed, in principle, to joining, so long as the date for joining is some years away and not yet determined it will become increasingly difficult to 'shadow' the policies of Euroland sufficiently closely or be accepted by the Euroland countries as being able to do so to be a realistic Pre-In.
Hence, the UK is likely to have to decide earlier than is usually anticipated, on adoption of the Single Currency. Sweden and Denmark are thought likely to follow the UK; though given the close result on the Amsterdam Treaty referendum, whether there is a realistic prospect of the Danish electorate permitting its government to adopt the single currency is not at all clear.
The adoption of the euro by the Ins requires a clear view to be taken as to the representation of the Community, and particularly the euro-area countries, within the various international fora, e. IMF, G7, etc. This is not only required for monetary matters, where the ECB now must have a role, but also on economic and trade policy matters. Shortly before the end of , the Vienna Summit took a decision on the issue; but this has not entirely clarified the situation, particularly in view of the unwillingness of the United States to accept increased European representation.
There are clear implications for the Outs and particularly for the UK, which is separately represented on a number of the key international fora and there may be divergence of views which would weaken the Community position in international discussions. However, it should not be impossible to reach a common view between the Outs and the Ins on the majority of occasions. The way forward for both Ins and Outs would seem to be to avoid, as far as possible, divergence between the Ins and Outs, with the Outs deciding sooner rather than later to adopt the single currency.
Precise economic convergence is not likely to be attained nor is it required to adopt the single currency. The essentials required are political will on the part of the Ins and the Outs; a commitment to further economic integration and parallel policy integration on economic and not simply monetary issues; and an acceptance that the Europe of economic and monetary union is a positive, and probably necessary, response to globalisation.
It is difficult to envisage a different scenario in the medium-term than a full-hearted commitment of all the Member States of the European Union to developing economic and monetary union as the mechanism for enabling the peoples and the countries of the European Union to control their economic destinies and provide the economic prosperity in terms of employment and income that the citizens of Europe desire. Eleven countries were deemed eligible under the interpretation of the Maastricht conditions and were willing discounting the formal 'opt-outs' negotiated by the UK and Denmark to adopt the single currency on 1 January The terms 'Ins' and 'Outs' 1 used in the title of this report are in a sense misleading.
The situation is rather that the Ins are now within the third stage of EMU, leaving the 'Outs' effectively within the second stage - even though, strictly speaking, the second stage has ceased to exist. The non-participating countries simply have a derogation and should, therefore, be regarded as 'Pre-Ins', waiting to enter the third stage. The distinction is, therefore, one of degree rather than a rigid dichotomy between the positions.
This is not to deny, however, that the differences will become greater and more difficult to manage as time goes by. Problems are likely to manifest themselves sooner rather than later. Whether the non-participating countries, aside from the obvious and not unimportant fact of their being members of the European Union, may be said to form a coherent grouping, either politically or economically, appears doubtful. As indicated later in this paper, notwithstanding some similarities, particularly between the UK and Sweden, there are considerable differences, economic and political.
Clearly, one factor pushing for a coherent approach is their situation as 'excluded' whether voluntarily or by failure to meet the convergence criteria members of the third stage of economic and monetary union; and hence from the further integration which will necessarily be pursued by the 11 countries which have adopted the euro.
However, whether or not they act as a coherent grouping, their relations, and particularly that of the UK as the largest 'Out' country, with the countries entering into the third phase of economic and monetary union will be crucial. This will be so whether we consider the position of Ins or that of the Outs, either individually or as a loosely linked group.
Economic and monetary union was never going to be easy for the European Union. The fact that a number of countries are likely to be outside for a period of some years represents a further set of difficulties. It is these potential problems which are the main subject of this paper. From the viewpoint of the Outs, had there been only a small majority of countries adopting the euro then it would have been in one sense an easier situation to manage.
The balance of power would have been in their favour had the Euro-area Euroland comprised two large countries - say Germany and France - together with a few of the smaller countries. However, the final outcome means that the Outs are clearly the 'outsiders', with the Ins having the substantial economic weight, and the political balance thus favouring them.
Hence, for both the Ins and the Outs the key unanswered question is: how EMU will work and be managed within the European Community as a whole? There will also be impacts on decision-making within the European Union, as the establishment of the 'Euro Council' indicates.
It is doubtful if there is a full recognition, particularly among the larger Member States, of what will be entailed in the commitment to economic and monetary union. This 'partial myopia' has been exacerbated by the unbalanced focus on monetary union rather than on the economic and monetary union envisaged by the Maastricht Treaty and, more specifically, the Delors Report; though this has been partly redressed by the Employment Chapter of the Amsterdam Treaty.
The concentration on the achievement of the Maastricht convergence criteria, and the establishment of the ECB, has so far concealed the need for substantial economic policy co-ordination at the European level. In his 2 December Council of Ministers' report to the Economic and Monetary Affairs and Industrial Policy Committee EMAC of the European Parliament, President in Office of the Council Juncker forcefully made the point that only Luxembourg and Belgium had any experience of running an economic and monetary union and the degree of extra solidarity and partnership in economic decision-making which was entailed.
It is a point worth re-emphasising because of the relative ease of the relationship between Belgium, with a GDP of billion ecu and Luxembourg with a GDP of It should be noted that what is immediately created by the establishment of third stage EMU is a single currency; a single monetary policy; and a single exchange rate policy, with price stability given primacy in relation both to the single monetary policy and to the exchange rate policy.
From 1 January and indeed effectively before then, from May an irrevocable link has been created between each of the existing national currencies of the participants in EMU. Hence there can be no national exchange rate policies.
It is also clear that the intention is that monetary policy will have primacy within EMU and, therefore, there will be no exchange rate target policy. In any event, the nature of the Euro-area as a substantially closed economy means that domestic monetary policy considerations will inevitably take priority over exchange rate policy, except in the case of a serious and sustained misalignment.
For some participants in EMU this may be hard to swallow. The Ins, as a group, meanwhile, will have economic policy managed via, principally, monetary policy. Any attempts to utilise other policies, eg fiscal policies, in 'opposition' to the direction of the single monetary policy will be subject to multi-lateral surveillance and the strictures of the Growth and Stability Pact. However, on the other hand, it does not seem to be fully acknowledged that the Ins are likely to insist on the exchange rate policies of the Outs being managed as policies of 'common interest', as the Treaty states.
This will certainly be the case if the Outs are properly to be regarded as Pre-Ins. If this policy imperative is interpreted literally and rigidly it implies that the monetary policies of the Outs will have to accommodate exchange rate targets based on stable relationships with the euro. This would entail the Outs not having independent monetary policies of their own. The key problem for the Outs is whether they do genuinely consider themselves in a transitional phase before entering the third stage of economic and monetary union.
This is more a matter of political attitude than the achievement of sustainable economic convergence, though the latter is clearly important, as the above points on exchange rate policies make clear and as is discussed later in this paper. Of the four Outs only Greece appears fully committed to entry once it has achieved monetary convergence based on the Maastricht criteria. For others, it appears to be more of a lack of political will to enter rather than an inability to meet the convergence criteria, though the UK has advanced as one of the primary reasons for delay a lack of 'sustainable convergence'.
This concept is not, apparently, congruent with the Maastricht convergence criteria - which the UK would mostly appear to meet - and appears also to be capable of varying interpretation. However, politically the UK government is committed in principle to joining, and active preparations are being made to ensure that business, in particular, is ready for entry.
The five 'tests' last done by the UK government should be 'unambiguously' met. The Chancellor of the Exchequer has set out five economic tests which have to be met before Britain enters:.
As this is the subject of this paper, at this point all that may be observed is that preparation for entry would appear to require that the following conditions be met:. The problems for the Outs may, however, be more serious than indicated by these 'conditions'.
In essence, the Outs will have not only to maintain or achieve the Maastricht conditions, but will have to do so during a transitional period when autonomous, further business integration will take place within Euroland and when also economic policy co-ordination between the Ins will deepen considerably. For the Outs it will be a major task to ensure that their business sectors are not disadvantaged in competitive terms and are able to handle the parallel currency implications of the existence of the euro as the currency of the majority of the European Union single market.
Equally important will be a recognition that the Outs will inevitably be excluded from economic policy deepening by the Ins; whatever may be the formal position of the EcoFin Council. From a political viewpoint it may be argued that a period observing the success of the euro from outside may persuade the population of the Outs to become more positive towards the euro. However, it may equally be argued that to remain outside, without too many disadvantages being perceived by the general public, may incline public opinion to swing against accepting the single currency.
Although it was made clear by the UK during the establishment of the Maastricht Treaty in that certain Member States would require to exercise derogations, notwithstanding the meeting of the convergence criteria laid down in the Treaty, the position regarding the treatment of these Member States with a derogation is not entirely clear.
This is not, perhaps, surprising. Apart from not being able to forecast, at the time of Maastricht, which countries would meet the convergence criteria and, in the case of the UK, and subsequently Denmark, which would also be willing to adopt the single currency, the implementation of the various economic and monetary policies within the EMU, let alone the impacts on those outside EMU, could not then be fully foreseen.
What is apparent is that some Treaty articles will not apply to the Outs, while others will still apply, when the Ins enter the third stage of EMU. However, even here the situation is not entirely clear. Hence it is not possible to provide an exhaustive definition of coverage. Essentially, however, the relevant articles do fall broadly into two groups:.
The non-applicability of these articles means, essentially, that the Outs retain their powers in the field of monetary policy and exchange rate policy according to national law. The applicability of these articles means that as far as possible the Outs shall be constrained to be subject to policies of common interest, save only for those allowing them rights to control monetary policy and exchange policy. Clearly, the Treaty position is important and is treated as such by all participants at the European and at national levels.
However, it should be noted that frequently it is the spirit of the Treaty which is interpreted rather than the strict letter of the law. In essence, the Treaty is likely to be used - in relation to the operation of economic and monetary policies between the Ins and the Outs - as a reference framework. The aim will be to minimise any conflicts between the Outs and the Ins. How far this will be possible, given economic realities, is questionable.
Moreover, the danger, if serious conflicts do arise, is that differing interpretations of the Treaty will be advanced. Eventually these can be resolved via the European Court.
However, this is a long, and, in this context, not a fruitful approach. It is likely, therefore, that any disputes relating to the operation of Treaty articles affecting the Outs and the Ins will be resolved politically rather than legally. The inspiration for the Stability and Growth Pact came very much from the Germans, with the emphasis placed firmly on the stability aspects.
The French, on the other hand, though not objecting to stability per se did not wish the 'regime' imposed to inhibit growth, and also believed that the Pact should be 'interpreted' using political judgement. The Pact has certainly been interpreted - and indeed supported by the majority of governments whether of the Ins or the Outs - as aimed at a continued reduction of deficits and public debt, and as constraining fiscal policy.
There is little doubt that this was the intention of the Pact and certainly its portrayal in the media and in the markets. Moreover, it will - certainly for the time being - exert a considerable fiscal discipline on the Ins and also partly voluntarily, on the Outs.
What is aimed at is the achievement of budget balance. Once this has been achieved - and some countries have already achieved this situation - then a considerable amount of cyclical flexibility is permitted, ie around the budget balance. Hence, as one of the criticisms of the Maastricht Treaty was that it did not provide for any contra-cyclical action on government budgets, the Stability and Growth Pact may be seen as rectifying that omission.
Based on a balanced budget situation there will be room for a Member State to operate prudent fiscal manoeuvrability. The intention is to enforce tight discipline on budgetary policy, attempting to ensure movement towards balance across the economic cycle. It also attempts to achieve tight coordination of all non-monetary economic policies between Member States, both to those inside the single currency and, to a lesser extent, to those outside.
It remains to be seen how effective this attempt at discipline and co-ordination will be. It seems likely to lead to some political tensions between the European institutions. It may also lead to an inadequate economic coordination, particularly if Member States attempt to negotiate 'deals' behind closed doors.
However, problems in this respect in practice see below may not be serious. The intention of the Pact is to define more specifically the excessive deficit procedure set out in the Maastricht Treaty.
The effect will probably be, during the transition period before budget balance across the economic cycle is achieved, to tighten budgetary policy with some associated costs. However, once a zero or minimal structural deficit is achieved then the effect will be to provide considerable flexibility in deficit financing across the cycle where considered essential or necessary. For some countries the intention also is to apply the 'golden rule', ie to borrow only for public investment purposes and not to fund public consumption.
The Pact will operate via two Council Regulations which were further defined in the Weigel Plan in May , which developed the earlier Council Resolution on the Pact. In essence these regulations will:. The first of these Regulations will ensure that Member States Ins will have to present 3-year, rolling 'stability programmes' Outs will continue to present similar 'convergence programmes'.
The stability and convergence regimes will contain:. The first stability and continued convergence programmes have now been submitted. Subsequent programmes would be updated annually and submitted not later than two months after the presentation of annual budget proposals by a Member State to its national parliament.
The EcoFin Council will then have two months to consider the programmes and, if necessary, recommend adjustments. The initial examination will be done by the Economic and Financial Committee of senior civil servants and central bankers. The second Regulation makes precise the deadlines for the excessive deficit procedures and the penalties attached,. The penalties initially involve payment of a non-interest bearing deposit from the Member State.
The deposit will include a fixed sum of 0. There will be an upper limit of 0. If the deficit is still in existence two years later then the initial deposit will become a non-refundable fine and a new non-interest bearing deposit will be issued. On initial examination the Pact seems harsh, both in its motivation and in its political impact; though clearly more severe on the Ins than the Outs.
However, there are two aspects which should be borne in mind when evaluating the likely impact of the Pact, and a third aspect relating to relations between the Ins and the Outs.
Notwithstanding the above formal, legal position it seems highly unlikely that such severe, and to some extent counter-productive, penalties will be exacted. More importantly will be the desire of member states to avoid the embarrassment of finding themselves in the position of being judged by their peers.
Moreover, there is the possibility of derogation from the procedure if the excess deficit is exceptional and temporarily resulting from an unusual event an asymmetric shock outside the control of the Member States. The operation of the Pact is likely to act as an effective budgetary discipline both for the Ins, who are potentially subject to the above harsh penalties for non-compliance, and the Outs who must attempt to avoid such deficits but who will not be subject to the penalties of the Pact.
The 'stability' and 'convergence' programmes which the Ins and the Outs, respectively, have to produce, are related to their national budget formulation each year. These will provide the mechanisms for ensuring that excessive deficits do not occur, save for exceptional events. Hence, despite some appearances to the contrary it is unlikely that the Stability and Growth Pact will create tensions between the Ins and the Outs.
Indeed, the adherence of the Outs to the Pact, via their convergence programmes, is more likely to significantly reduce the likelihood of potential problems than to create difficulties. The roles of the various European-level institutions in relation to economic and monetary union are both complex and contentious. The fact that 11 countries have adopted the single currency means, because of the qualified majority voting procedures, that the eleven Ins have a permanent majority, when voting together, in the EcoFin Council See 4.
Moreover, in the context of monetary policy, the European Parliament, as the only directly-elected European-level institution, may lay claim to a key role in terms of holding democratically to account the independent and unelected European Central Bank, which will be responsible for the common monetary policy of the Euro-area, and whose influence will, by this fact, and its operational roles, impact on all aspects of economic policy, affecting all Member States of the European Union.
The suggestion of a new, powerful, role for the European Parliament in relation to monetary policy, notwithstanding the clear, if limited, powers given to the European Parliament by the Treaties, is likely to be resisted by most Member States' governments.
The issue will, of course, be resolved in the course of time, and it seems certain that, whatever the views of governments, the European Parliament will have a crucial role in influencing the European economic debate within which the ECB and the ESCB will have to formulate and implement monetary policy. In relation to economic policies, e. This is likely to become a contentious issue for the management of EMU. There is also the issue of the role of National Parliaments of both Ins and Outs in influencing the policies of individual Member States, and whether some co-ordination of views can take place at European level.
The institutional issue relating to the powers of the European Parliament is more complex than appears at first sight.
0コメント