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...

In this paper we solve a particular type of stochastic process switching problem where the terminal date is fixed but the terminal price may depend on past prices. We apply this framework to the effect of various conversion modalities currently discussed on exchange rate dynamics in the...

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...

In this paper we contrast regional and national data on real exchange rate movements, the growth rates of output and employment, labour mobility and unemployment. We find that asymmetric shocks tend to be more prevalent at the regional than at the national level in Europe. The presumption of the...

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...

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...

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...

We use a monetary (Dornbusch) model of the exchange rate and introduce speculative dynamics, in which fundamentalists and chartists interact. The resulting non-linearities in the model produce `chaotic' behaviour of the exchange rate. We also analyse the effects of money-stock surprises in such...