THE TRANSITION TO EUROPEAN MONETARY UNION AND THE EUROPEAN MONETARY INSTITUTE

The European Monetary Institute (EMI) will prepare a framework for European Monetary Union (EMU) monetary policy during the transition to the EMU. This involves a trade-off between deepening financial market integration and harmonizing central bank instruments, a choice between centralized and decentralized monetary strategies with significant welfare implications, and a trade-off between expected welfare and certainty of policy outcomes. As a result of being dominated by national central bankers and of the conflict between the core and the periphery of the European Community (EC), the EMI is biased toward an inefficient solution. Enlargement of the EC by the European Free Trade Area (EFTA) group would raise the probability of a more efficient, two-track EMU, which initially would involve only the core group.     

THE IMPACT OF INFLATION ON NEW HOUSE PRICES

It is often stated that real house prices respond to inflation in ways similar to assets infixed supply, such as gold or antiques. This paper proposes that, instead, house prices are determined primarily by the cost of producing new houses. Thus, inflation affects price mainly through input markets and through expansion in housing starts. This proposition is supported in an examination of annual changes in house prices between 1965 and 1982 in 12 sub regions of the United States     

LDC DEBT: THE ROLE OF THE INTERNATIONAL MONETARY FUND

For a combination of reasons that differ among countries, many developing countries' foreign debt service obligations have become difficult to meet. The size of the problem in 1982 raised concern over the stability of the banking system. The International Monetary Fund (IMF) provided the forum through which the international community's strategy for meeting this concern has evolved. The IMF also played, and continues to play, an active role in helping to finance the structural and balance-of-payments adjustments needed in countries with debt service problems. The IMF's involvement is an integral part of the broader strategy, which builds on the cooperation of debtors and creditors, on a case-by-case basis. The objective is to share the burden in a balanced way. Obtaining adequate adjustment in deficit countries is central to the strategy, but the Baker Plan increased the emphasis on restoring longer-term growth through more far-reaching structural adjustments supported by longer-term financing. The IMF has modified and enhanced some of its lending facilities in light of this emphasis. However, though the short-term nature of its lending was critical in averting a possible banking crisis during 1982 and 1983, it diminishes somewhat the IMF's role in financing the more protracted adjustments now required.     

ON THE FEASIBILITY OF A ONE-SPEED OR MULTISPEED EUROPEAN MONETARY UNION

This paper addresses two questions: (1) Is a twelve-country monetary union in Europe feasible? (2) Can monetary union be achieved at multispeed, i.e., with a small group of countries going first, and later admitting the others? After examining several politico-economic arguments concerning problems of feasibility of the union, we conclude with a fair amount of skepticism concerning the multispeed idea. We show that the final result of the process of monetary integration is dependent upon the number of countries that initiate it. Our discussion of feasibility sheds some light on the political economy of the recent (Fall 1992) turmoil in the monetary system of Europe.     

THE EUROPEAN ECONOMIC COMMUNITY AND THE DEVELOPING COUNTRIES

In 1962 an article by Mr. Angelos Angelopoulos, professor at the Pantheios School of Political Sciences (Athens), entitled "The Third World, the European Common Market and the West", was published in the Annals . In that article the author described, with the freedom which is by tradition allowed to all contributors to the Annals , the fears and anxieties of the newly developing countries regarding the European Economic Community.
In the present article Mr. André Marchal, lecturer at the Faculty of Law and Economics of the University of Paris, discusses the same problem with the same freedom and a viewpoint radically different from that of Professor Angelopoulos.     

THE POLITICAL ECONOMY OF EUROPEAN MONETARY UNIFICATION: AN ANALYTICAL INTRODUCTION

European monetary unification (EMU) - the creation of a single European currency and a European Central Bank - is both an economic and a political phenomenon. Yet few studies have attempted to address simultaneously the political and economic dimensions of the process. In this introduction, we review and extend the relevant literatures. The evidence leads us to conclude that EMU is driven mainly by political rather than economic factors, although our understanding of even these political forces remains incomplete.     

BRETTON WOODS, THROUGH THE LENS OF STATE-OF-THE-ART MACROTHEORY AND THE EUROPEAN MONETARY SYSTEM

‘Le moyen d'avoir raison dans l'avenir est, á certainesheures, de savoir se résigner a etre démodé’(E. Renan. 1882, p. 56).     

WTO COMMITMENTS AND CAP ADOPTION IN CENTRAL AND EAST EUROPEAN COUNTRIES: THE CASE OF ROMANIA

MOCT-MOST: Economic Policy in Transitional Economies -     

OUTLOOK FOR THE EUROPEAN MONETARY UNION: THE MESSAGE FROM EASTERN EUROPE

The European Community (EC) seems headed toward monetary union, either with "permanently" fixed exchange rates or with a common currency. Ceteris paribus, the breakup of the Soviet empire in Eastern Europe makes monetary union less desirable. One can expect further shocks from the East. Analyzing stock markets' reactions to events in the East from late 1988 to early 1990 shows that these shocks typically differentially affect EC members, particularly Germany. These differential shocks often call for adjustments in relative national price levels, which can be accomplished most easily with exchange-rate adjustments. The likelihood of such pressures reduces the credibility of a system of pegged rates and makes the system more vulnerable to speculative runs. A common currency is more credible by its nature but may give an inflationary bias to the European Monetary Union.     

MONETARY POLICY IN EMU WITH ASYMMETRIC TRANSMISSION AND NON-TRADABLE GOODS

Which policy objective should a central bank pursue in a monetary union with asymmetric monetary transmission and different rates of inflation? Should it base its decisions on the EU‐wide average of inflation and growth or should it instead focus on (appropriately weighted) national utility losses based on national rates of inflation and growth? We find that a policy which minimises the sum of national utility losses leads to higher average utility if the variability of common shocks is large relative to idiosyncratic demand shocks in the non‐tradables sectors. We draw conclusions for the appropriate weight of common and national objectives in the union.     

NON-SEPARABLE CONSUMPTION-LABOR CHOICE AND THE INTERNATIONAL TRANSMISSION OF MONETARY POLICY SHOCKS: A NOTE

This paper derives in the model developed by Obstfeld and Rogoff (1995) a steady state that is stationary in the presence of monetary policy shocks. To this end, the impact of monetary policy shocks on the current account is shut off by assuming that the preferences of households exhibit a particular non-separability between consumption and labor supply. [F31, F41]