In this paper we argue, first, that the Maastricht-inspired policy mix of monetary and fiscal restriction applied during the first half of the 1990s is, to a significant extent, responsible for the build-up of both the unemployment rate and the government debt to GDP ratios on the European...

The Maastricht Treaty and the Madrid Council decision severely restrict the choice of the euro conversion rates. In practical terms the authorities can only select the Ecu rates prevailing in the market the day before conversion. The market will lack a fixed point, however, so that infinite...

The use of forward interest rates with a settlement time after the start of EMU (1 January 1999) allows us to derive probabilities attached by the market to the occurrence of EMU. We use the DM/ECU forward interest rates as our central source of information. We arrive at the conclusion that the...

The Maastricht transition strategy towards monetary union is based on the idea that the transition strategy should be gradual, and that entry into the union should be conditional on the fulfilment of convergence criteria. It is argued in this paper that this approach is not based on an economic...

The possible emergence of a monetary union in Europe raises a number of new and difficult questions. A central concern is the implication for fiscal policy-making. Fiscal policy assumes an increased importance once the monetary policy instrument is lost. The Delors Report has suggested that...

In this paper we analyse the prospects of a mini currency union in Europe. We argue that the Maastricht strategy will create a situation in which the countries excluded from the EMU will use their negative voting power to bar the entry of a number of core countries into the union. The countries...

We develop an institutional framework for central banks that try to pursue a stability-oriented monetary policy with the strategy of exchange rate targeting. Recent experience shows that a crucial element of this approach is to avoid destabilizing capital inflows. Policy makers can exert...

This paper surveys the literature on monetary integration to discover the economic rationale of the Maastricht convergence requirements. The traditional theory of optimum currency areas is silent on the need to have Maastricht-type convergence requirements. The new view of monetary integration...

In this paper we analyse the use of inflation targeting as a device to facilitate inflation convergence of countries outside EMU to the EMU-inflation rate, and compare it with exchange rate pegging. We find that inflation targeting suffers from a similar credibility problem as a policy of...

This paper analyses several issues. First, it describes the main features of ERM II and compares them with those of ERM I as it evolved during the 1980s and 1990s. Second, it analyses whether, and under what conditions, ERM II will be more successful than its predecessor in avoiding disruptive...