DP1303 Designing Fiscal and Monetary Institutions for a European Monetary Union

Author(s): Roel Beetsma, A Lans Bovenberg
Publication Date: November 1995
Keyword(s): Convergence, European Central Bank, European Monetary Union, Inflation Aversion, Optimal Institutions, Structural Policies
JEL(s): E52, E58, E61, E62, F42
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1303

This paper explores under what conditions a European Monetary Union (EMU) is an optimum currency area. The scope for an EMU increases with convergence of structural and fiscal policies, small money holdings, a conservative European Central Bank, and dependent national central banks. How national policies affect the rest of the Union once the EMU has been formed is also investigated. The case for surveillance of national structural and fiscal policies appears to depend largely on monetary arrangements in the Union.