Change at the ECB Executive Board

In view of the future enlargement of the euro area the European Central Bank (ECB) will have to be reformed. The ECB itself has presented a reform proposal which points in the right direction, but which could be improved upon for more efficient decision-making.

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*Sylvester C. W. Eijffinger, Professor of European Financial Economics and Jean Monnet Professor of European Financial and Monetary Integration, CentER, Tilburg University, The Netherlands; Professor of European Financial Integration, RSM Erasmus University, Rotterdam, The Netherlands; Research Fellow, CEPR, London; Member of the Panel of Experts of the Committee on Economic and Monetary Affairs of the European Parliament to which the article was first presented as a Briefing Paper in March 2006. Comments on an earlier version of the Briefing Paper by Prof. Hans Blommestein and Dr. Edin Mujagic are gratefully acknowledged.     

Treaty Reform: Consequences for Monetary Policy

The proposed reform treaty, aimed at enhancing the efficiency and democratic legitimacy of the enlarged Union as well as its position on the global stage, has a number of important implications for monetary policy and the status of the European Central Bank. Can the reforms be expected to make euro area governance more efficient? Could they potentially jeopardise the ECB's independence and European monetary policy? Member of the Panel of Experts of the Committee on Economic and Monetary Affairs of the European Parliament, to which the article was first presented as a Briefing Paper for the Monetary Dialogue with the President of the European Central Bank in October 2007. The author gratefully acknowledges the helpful comments of Edin Mujagic and the excellent research assistance of Rob Nijskens.     

Book Reviews

Informal Financial Markets in Developing Countries by PETER J. MONTIEL, PIERRE-RICHARD AGENOR and NADEEM UL HAQUE (1993), pp. xi & 212, £40.00 hardback, ISBN 1 55786 357 1. Protectionism and World Welfare by DOMINICK SALVATORE (ed.) (Cambridge, New York: Cambridge University Press, 1993), pp. xiv & 447, £45.00, US $69.95 hardback, £16.95, US $19.95 softback, ISBN 0 521 41455 5, 0 521 4 2489 5. The Bias Against Agriculture, Trade and Macroeconomic Policies in Developing Countries by ROMEO M. BAUTISTA and ALBERTO VALDÉS (San Francisco: Institute of Contemporary Studies, 1993), pp. xxii & 339, ISBN 1 55815 245 8. The British Economy Since 1945 by N.F.R. CRAFTS and NICHOLAS WOODWARD (eds.), (Oxford, New York: Oxford University Press, 1991, pp. 549, £15.00 softback, ISBN 0 19 877273 4. European Monetary Integration, From the European Monetary System to European Monetary Union by DANIEL GROS and NIELS THYGESEN (London, New York: Longman, 1992), pp. xiii and 495, £19.99 softback, ISBN 0 582 07921 7. The Growth of the Public Sector, Theories and International Evidence by NORMAN GEMMELL (ed.), (Aldershot, Brookfield Vermount: Edward Elgar Publishing, 1993), pp. xiv and 261, £49.95 hardback, ISBN 1 85278 525 X.     

Publications Received

The Editors include in this list publications which they consider may be of interest to readers of The World Economy. Items for inclusion in this section should be sent to the editorial office in London. Economic Policy and Development: New Perspectives Agriculture under the Common Agricultural Policy Economics of Agricultural Development in Tropical Africa Germany's International Monetary Policy and the European Monetary System The Future of the Soviet Economic Planning System Taking the Initiative: Canada's Trade Options in a Turbulent World US Foreign Policy and the Third World: Agenda 1985-86 Multinational Enterprises and Government Intervention The Hungarian Economy in the Twentieth Century Bank Lending to Developing Countries: the Policy Alternatives     

Exchange-rate Regimes and the Transition Process in the Western Balkans

Although the importance for successful transition of a monetary policy aiming at a sustainable price level has often been stressed in the academic literature, there is still ample room for further research into the choice of the exchange-rate system throughout the different phases of the transition process. This article deals with the question of how the choice of a specific exchange-rate system affects the economic success of a country in transition and, above all, its gradual integration into the European Union (EU) and European Monetary Union (EMU). It focuses on the transition process in five South-Eastern European countries (SEECs). The authors are grateful for valuable comments received from participants in the EUROFRAME 2006 Conference in Berlin, Germany, the ICMAIF 2007 Conference in Rethymno, Greece, and the EEFS 2007 Conference in Sofia, Bulgaria.     

On a Reformed Stability and Growth Pact

In March 2005, the Council of Economics and Finance Ministers (Ecofin) presented its own suggestions for a possible Stability and Growth Pact (SGP) reform in a Report to the European Council. The Council Report divides its proposals into three parts, namely improving governance, strengthening the preventive arm and improving the implementation of the Excessive Deficit Procedure (EDP). The present paper contains a critical analysis of the ideas contained in the Report, accompanied by comparisons of the suggestions with earlier proposals for reform in the literature and the Commission Communication of September 2004.

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*Professor of European Financial Economics and Jean Monnet Professor of European Financial and Monetary Integration, CentER, Tilburg University, The Netherlands; Research Fellow, CEPR, London, UK; Member of the Panel of Experts of the Committee on Economic and Monetary Affairs of the European Parliament to which the article was first presented as a Briefing Paper in May 2005.     

Will continuing liberalisation in the EC lead to instability in the EMS?

The liberalisation of capital movements and the creation of a market without internal frontiers within the European Community have far-reaching consequences for the European Monetary System. Sr. Wolfgang Schröder analyses the opportunities and risks associated with these developments.     

The single market and EMS instability

The following analysis of the 1992/93 crisis of the European Monetary System finds that the unfolding of the single market dynamics will make European Monetary Union a difficult stage to achieve. Further monetary integration is only feasible if full employment and sustained growth are achieved in the EC. The Maastricht Treaty needs some add-ons if economic and monetary union is to succeed.     

The Unifying Role of the Single Currency

Perhaps the single most tangible symbol of the European Union is its single currency, the euro. Within the European Economic and Monetary Union, it was seen as a tool to ensure that European integration would be truly irreversible. However, the euro has also contributed to cleavages and asymmetries. This article reviews whether the euro can fulfil the unifying role envisioned for it, examing the importance of the euro in four crucial European relationships.     

The Euro and the World Monetary system

Stage Three of European Economic and Monetary Union is scheduled to begin on 1st January 1999 at the latest; by 1st July 2002 the euro will probably be the only legal tender in the participating countries. The role of the European Central Bank and the euro in the international monetary system is still very unclear, however. This poses a risk for the intended independence of the ECB.     

An assessment of the effectiveness of the monetary dialogue on the ECB’s accountability and transparency: A qualitative approach

The European Central Bank has been seen by some observers as lacking transparency and accountability. The following article examines whether the monetary dialogue between the European Pariliament’s Committee on Economic and Monetary Affairs (ECON) influences the ECB’s behaviour in this regard. This is done by comparing the issues raised by the ECON and its panel of experts and the changes in the ECB’s procedures and arrangements.     

The taming of the Shrew(ish snake)?

An article in the last issue of INTERECONOMICS discussed problems of the monetary integration in Europe as they may arise under the new European Monetary System¹. It dealt more particularly with the exchange rate problems whereas the following contribution is concerned with the intervention and credit mechanism.     

从欧洲货币一体化看东亚货币区的建立

欧洲货币一体化的实践验证了最优货币区理论。作者以欧洲货币区的适应发展为参照 ,根据最优货币区理论所提出的标准 ,分析了东亚地区实行单一货币的可行性 ,结论是 ,东亚各国与欧元成员国相比存在很大差距 ,在很多方面尚不能满足建立最优货币区的基本条件 ,因此 ,要建立东亚货币区还任重道远。     

Economic implications of the Divergence Indicators in the EMS

The system of so-called Divergence Indicators in the European Monetary System puts pressure on the monetary authorities to consult before the intervention points are reached in the foreign exchange markets. Under integration aspects this arrangement marks an advance, but it also carries risks and dangers with it.     

Financial integration and currency risk premium in CEECs: Evidence from the ICAPM

This paper aims to study the Central and Eastern European Countries' (CEECs) dynamics of financial integration in the euro area with the prospect of their integration into the European Monetary Union. Our empirical analysis is based, successively, on a MGARCH model with time-varying correlations, a state-space model and a Markov-switching model. The results show that financial integration (i) is not perfect but is increasing and (ii) is linked to currency stability. The growing financial integration in 2007–2009 seems to be rather the result of the shock propagated by the global crisis.     

Effects of the European Monetary Union on High-Technology Exports

Journal of Industry, Competition and Trade - Our study estimates the effects of the European Monetary Union (EMU) on high-technology (HT) export and assesses the potential knowledge spillovers of...     

Baltic monetary regimes in the XXIst century

The accession of Estonia, Latvia and Lithuania to the European Union would mean that they would join the Economic and Monetary Union in the status of “countries with a derogation”. They would remain committed to adopting the euro eventually and to this end to joining ERM II. The following article examines the present monetary regimes of the three countries and the progress made so far in their preparation for EMU.     

Controversial issues about the “right” monetary order

The European Monetary System (EMS) has now been in operation for about one year. Dr. Burgard explains the main elements of the system and the problems still awaiting solution.     

Problems of monetary integrationin Europe

On December 4/5, 1978 the heads of states and governments of the EC-member states are meeting in order to take decisions on the new European Monetary System agreed on at their Bremen summit. The problems of monetary integration in Europe are discussed in this article.

     

EMU: Experiences to date and challenges for the future

Have the first two years of European Monetary Union fulfilled the expectations of its supporters? Or have the fears of the critics been confirmed? What challenges will EMU have to face in the years ahead?