Price and output level convergence between new member states and the existing EU necessarily implies inflation and growth divergence for many years to come. That complicates the conditions for accession to the euro. In this Paper, we focus on debt dynamics for the eight new member states from...

In this paper we examine the international implications of monetary union in the European Community (EMU) and the associated international costs and benefits. We consider prospective changes in international institutions, the potential role of the ecu as an international currency, and the...

This paper discusses the conditions under which currency unions would be desirable and viable. We discuss and present new empirical evidence concerning the operation of existing currency unions in federal states and among regional country groupings. In particular, we examine the traditional...

Regional flows of federal taxes and transfers within the United States and Canada are used to analyse long-term fiscal flows (the redistributive element) and short-term responses to regional business cycles (the stabilization element). In the United States, long-run flows amount to 22 cents in...

This paper analyzes the macroeconomic consequences of the establishment of a monetary union in the presence of unionized labour markets. It is shown that the effects of the formation of a monetary union depend on several labour market features, such as the degree of centralization of wage...

We lay out a tractable model for fiscal and monetary policy analysis in a currency union, and analyse its implications for the optimal design of such policies. Monetary policy is conducted by a common central bank, which sets the interest rate for the union as a whole. Fiscal policy is...

This paper investigates the importance of fiscal policy in providing macroeconomic stabilisation in a monetary union. We use a microfounded New Keynesian model of a monetary union which incorporates persistence in inflation and non-Ricardian consumers, and derive optimal simple rules for fiscal...

The paper explores the case for monetary and fiscal unification. Monetary policy suffers from an inflation bias because the monetary authorities are not able to commit. With international risk-sharing in a fiscal union, fiscal discipline suffers from moral hazard. An inflation target alleviates...

The main conclusions of this paper are the following. In order to minimize switching costs, the name of the new EU currency should be the Deutschmark. Differential national requirements for seigniorage revenue provide a weak case for retaining national monetary independence. From the point of...

How does a monetary union work when labour markets are heterogeneous? Since shocks are transmitted via both trade links and the common monetary policy and propagated via labour market responses, it follows that labour market institutions may have not only national but also union-wide...