Citation

Discussion Paper Details

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Title: Is There a Conflict Between EC Enlargement and European Monetary Unification?

Author(s): Tamim Bayoumi and Barry Eichengreen

Publication Date: May 1992

Keyword(s): EC Enlargement, EFTA and EMU

Programme Area(s): International Macroeconomics

Abstract: Recent proposals for enlarging the European Community to include the EFTA countries raise the question of whether the new members should participate in a European Monetary Union. In part, the issue hinges on the incidence of aggregate supply and demand disturbances. We use data on prices and output and a VAR decomposition to analyse this issue empirically, grouping economies according to the magnitude of the disturbances, their cross-country correlation, and speeds of response. We distinguish an EC `core' (Germany and its immediate neighbours) and an EC periphery (UK and the Southern European members of the Community). Austria, Sweden and Switzerland display more similarity to the EC core than do Finland, Iceland and Norway. This suggests that the case for EMU participation is stronger for Austria, Sweden and Switzerland than for the other EFTA countries.

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Bibliographic Reference

Bayoumi, T and Eichengreen, B. 1992. 'Is There a Conflict Between EC Enlargement and European Monetary Unification?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=646