We analyse the proposed ‘stability pact’ for countries joining a European Monetary Union (EMU). Within EMU shortsighted governments fail to fully internalize the inflationary consequences of their debt policies, which results in excessive debt accumulation. Hence, although in the absence of...

We develop and compute a dynamic equilibrium model where economies differ on the relative efficiency of financial intermediaries and, therefore on households portfolios and currency holdings. Our model economies have some of the features of the different financial structures in countries of the...

Policy-makers’ incentives to undertake costly reform depends on the international monetary system. We consider the effect of monetary regimes on labour market reform. We find international negotiation of monetary policy produces less reform than non-cooperation. Reform is lowest of all with...

The paper considers the implications for the EU accession candidates of Central and Eastern Europe of the fiscal-financial constraints imposed by the Stability and Growth Pact and the Maastricht Treaty. Our findings apply also to those current EU members whose initial conditions (e.g....

The ‘Stability Pact’ agreed at the Dublin Summit in December 1996 and concluded at the Amsterdam European Council in June 1997 prescribes sanctions for countries that breach the Maastricht deficit ceiling in stage three of European Monetary Union. This paper explores possible motivations for...

If Stage Three of EMU starts on 1 January 1999, transition issues remain on two time scales. Until 1 July 2002, national currencies and the euro coexist as legal tender. We argue that intra-EMU currency risk exists in principle during that period, but that no EMU member can be forced out through...

This 2003 Institute for Fiscal Studies Lecture addresses two sets of issues relevant to current and prospective future E(M)U members: the consequences of the Stability and Growth Pact for fiscal-financial sustainability and macroeconomic stability, and some risks associated with operational...

This paper analyses the nature of the monetary policies in the EMS during the most recent recession. It shows that these monetary policies were very restrictive in an historical perpective, and identifies the characteristics of the workings of the EMS responsible for these monetary policies.

The exchange-rate regime is often seen as constrained by the monetary policy trilemma, which imposes a stark trade-off among exchange stability, monetary independence, and capital market openness. Yet the trilemma has not gone without challenge. Some (e.g., Calvo and Reinhart 2001, 2002) argue...