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The asymmetric level of integration within the European Union (EU) regarding membership in the European Monetary Union (EMU) has resulted in inconsistent responses to crises such as the Great Recession of 2007–2009 and the European sovereign debt crisis of 2010–2013. Furthermore, it has led to varying outcomes of monetary and fiscal policies implemented across EU countries. This paper aims to investigate the impact of monetary and fiscal policies on economic development and employment through the inflation channel in the EU between 2007 and 2015, using Partial Least Squares Structural Equation Modeling (PLS-SEM). The results indicate that the outcomes of monetary policy have been mixed between EMU and non-EMU countries, resulting in different measures and negative spillover effects of the European Central Bank’s (ECB) policy on countries outside of the EMU. Meanwhile, the ability of fiscal policy to lower inflation and boost economic growth and employment has been limited, which means that the impact of fiscal policy on both economic development and employment and inflation has been minor. Based on the findings of this study, there should be better coordination of monetary and fiscal policies at the EU level to support the macroeconomic stability of the Union during times of crisis.

In this article, we present the impact of the monetary policy stance of the European Central Bank (ECB) since 2007 on bank lending in the euro area and compare the effects of the main measures: interest rate changes, liquidity provision, and asset purchase programmes. We also analyse the channels through which monetary policy might influence the banking system and narrow our focus to the individual countries. The main results indicate stimulating impact of ECB’s policy stance on bank lending that extends its influence mainly through interest rate cuts further supported by the liquidity provision and asset purchase programmes. However, we also find considerable differences across the member states, often depending on the state of the banking system and loan demand in the member state. The results support the variety of monetary policy measures introduced by the ECB, as each played its own role in supporting the banking system and encouraging bank lending in the euro area. Keywords: Unconventional monetary policy, Bank lending, Monetary transmission, EMU, Synthetic indicator.JEL: E50, E52, E58, G21.

European Papers - A Journal on Law and Integration, 2022 7(2), 799-831, I. The complex institutional balance in the external relations of the European monetary policy: legal bases. - II. The external relations of the European Union in international economic and monetary relations. - III. The external relations of the eurozone: the ECB as a representative of the Union and of the eurozone. - III.1. Institutional "intricacies". - III.2. Practical arrangements. - IV. The external relations of the ECB under art. 6 of the ESCB Statute: transnational technical monetary relations? - V. Residual functions of national central banks: do they also pertain to external relations? - VI. Political and technical obstacles to a unified external representation, and the advantages of speaking with one voice. - VII. Concluding remarks: the ECB and other actors., This Article will attempt to answer three main questions: i) whether the ECB is a qualified representative for the eurozone or the Union in international fora - and if so, ii) to what extent its role falls within art. 138 TFEU or rather art. 6 of the ESCB Statute - and iii) whether national central banks in the eurozone enjoy any residual competence in managing external activity falling within the area of monetary relations and specifically ESCB technical cooperation projects. To that end, it will be necessary to explore the current external projection of the Union and of the eurozone in the area of economic and monetary policies and their representation in the main fora in charge of global economic governance. Specific attention will be paid to the impact of the dichotomy Union-eurozone on the EMU external relations. In the concluding remarks, the advantage of a single eurozone external representation at all levels will be pointed out, after having explored the political and technical obstacles which explain the delay in the achievement of such an objective.

The introduction of the euro for Croatian citizens meant the abandonment of the deutsche mark, a reliable currency, which had been used for a long time for comparison purposes and savings. Today, Croatia is a small, opened, indebted and highly euroised country, in which frequently mentioned introduction of euro is seen as a solution that could improve country’s economic position. The question of a common monetary policy is closely related to the issue of business cycle coherence between the members of such an area. Although a cycle in economic activity is a stylized fact, in economics it is less clear as to when the fluctuations in macroeconomic variables coincide between countries/regions and when these dynamics synchronize and/or converge. By analyzing two measures of business cycle coherence, namely synchronicity and similarity, between Croatia and new EMU members, we want to reconcile with vast empirical evidence supporting the hypothesis that monetary integration process results from a greater business cycle convergence and leads to an optimal currency area which finally leads to greater economic welfare in each of the member countries. Estimations are based on deviation cycle approach. Results in general indicate relatively similar cycle dynamics across the observed variables, suggesting that Croatia satisfies this selective criterion for its inclusion into the monetary union. Nonetheless, monetary integration is far more complicated issue, hence it requires further scientific verification and conceptualization.

This paper examines effects of the euro introduction on credit cycle coherence in the euro-zone through six channels. We construct and describe credit cycles for total bank credit, household mortgages and non-financial business loans for 16 EMU economies over 1990-2015. Credit cycle coherence is measured by synchronicity of cycle movements and similarity of their amplitudes. We find that the effect of euro introduction runs through elimination of currency risk and higher capital flows, which decrease coherence of total credit and mortgage credit cycles, but increase coherence of business credit cycles. Falling interest rates contribute to the convergence of total and mortgage credit cycles. Financial deregulation and legal harmonization are associated with lower coherence of all credit cycles, while trade openness has the opposite impact. The findings impinge on monetary policy effectiveness in the eurozone, with implications for macroprudential policy. (C) 2017 Elsevier Ltd. All rights reserved.

This paper evaluates the European monetary convergence for period 2001 and 2013. The main purpose of this contribution is the estimation of the so-called OCA index, which indicates the proximity of two economic areas. The paper is theoretically based mainly on the research of Bayoumi and Eichengreen (1997), and Horváth and Komárek (2003). Selection and calculation of variables precedes the econometric analysis, and those variables correspond to the basic characteristics of an optimum currency area. Although the estimated model fulfills the conditions of economic and econometric verifications, its explanatory capabilities are significantly reduced due to the limited set of input data. Results of the analysis point to relatively stable values of indices in the period, but their further examination of the development in time reveals a steady deterioration in the case of almost all economies. That means that the convergence process was not proven because a decrease in OCA indexes values over the time was not observed. According to the results of comparison, methodological approach of the OCA indexes cannot be considered reliable because minor differences in calculation give different outputs.

The necessity of a monetary integration process in the European Union is inarguable. Monetary Union has a corner stone role for letting Economy in the EU to act as a whole. Only 19 members of the EU take place in the Euro Zone. In this case; there is a long time needed for completion the monetary integration process. European Central Bank (ECB) which is responsible for the monetary policy application in Euro Zone, will have serious weakness and desperation and having them is inevitable; because the economic and political integration of the EU is not completed yet. All kinds of conflicts in political and economic integration process of the EU and economic crises, will have negative impacts on the EU and also on Euro. ECB is helpless about any negative developments that take place or may take place in European Monetary Union (EMU) Area and it does not have an efficient intervention chance for preventing the negative impacts occurring on the Euro. The aim of the study is to present the weakness and desperation of the ECB about applying policies for a stable Euro. Avrupa Birliği'nde (AB) Parasal Birlik sürecinin gerekliliği tartışılmazdır. Parasal Birlik; ekonominin AB içerisinde bir bütünsel olarak hareketliliğinin sağlanabilmesi açısından köşe taşı niteliğindedir. AB'nde şu an için toplam 28 olan AB üyesi ülkeden yalnızca 19 üye euro bölgesinde yer almaktadır. Bu durum parasal entegrasyonun tamamlanabilmesi için uzun süreye ihtiyaç olduğunun göstergesidir. Euro bölgesinde para politikalarının uygylanmasından sorumlu olan Avrupa Merkez Bankası (AMB), AB'nin ekonomik ve siyasi entegrasyonunun tamamlanmamasından dolayı ciddi zaaflar ve çaresizlikler yaşamaktadır; ve yaşaması da kaçınılmazdır. AB ve euro bölgesinde yaşanan her türlü sayasi ve ekonomik entegrasyon süreçlerindeki çatışmalar ve aynı zamanda ekonomik krizler; AB'ni ve euroyu olumsuz etkilemektedir. Yalnızca euronun yönetiminden sorumlu olan AMB; AB'nin ve aynı zamanda Avrupa Para Birliği (APB) bölgesinde yaşanan ve yaşanması muhtemel her türlü olumsuzluk karşısında çaresiz kalmakta ve euroda yaşanan olumsuzluklar karşısında çok fazla müdahale edebilme şansı olamamaktadır. Çalışmanın amacı; AMB'nın istikrarlı bir euro yönetimi konusundaki zaaflarını ve çaresizliğini ortaya koymaktır.

The 2008/2009 world financial crisis, as well as the 2010 onwards European sovereign debt crisis, retriggered the debate on costs and benefits of a European Monetary Union membership. This thesis examines whether Sweden experienced net costs or benefits in opting out the EMU, especially in comparison to Finland due to the close link between both economies, as well as cultural and geographical similarities. While both countries were drawing a convergent economic path from the 1990’s, in 1999, with the Euro adoption in Finland, the two Scandinavian economies chose different tracks in terms of monetary policies. Sweden opted to remain outside the EMU and maintain the floating exchange rate and the control of domestic monetary issues, while Finland chose to relinquish monetary policy autonomy and started to follow the rules and constraints of the European Central Bank. Furthermore, the paper analyzes the economic development of UK in comparison with France, due to the approximate size of both economies (one EMU member and the other an outsider), and also Germany, the EMU leader, and the Euro area as a whole. The data base from Eurostat and the Synthetic Counterfactual Method have shown that there were net benefits for Sweden not to had joined the EMU. Moreover, the paper presents the Theory of Optimum Currency Area, first introduced by Mundell in 1961 as the starting point on the discussion of costs and benefits of an EMU membership.

The persistently low wage and price growth in the EMU after the Great Recession of 2009 led some economic observers to conclude that the Phillips Curve has broken down and that the ECB should therefore reconsider its infl ation target. This study makes use of the considerable cross-country and cross-time heterogeneity in terms of infl ation and capacity utilisation of EMU member states after the Great Recession to investigate whether these claims are corroborated by empirical evidence. The results point to the conclusion that the Phillips Curve is alive and well in the EMU and centred at or only slightly below the ECB’s inflation target. Therefore, a readjustment of the infl ation target seems unjustified. Furthermore, as the ECB can expect inflation to return to its target, it possibly can accelerate tapering its unconventional monetary policy measures as the recovery continues.

We use a SVAR approach to the effects of fiscal and monetary policies, as well as their interactions (policy mix) for the US and the Euro Area (EMU). Overall, our results show that these two cases are different from each other. First, while in the case of the US there is evidence of Keynesian monetary policy, the same is not true in the case of the EMU. Second, considering the effects of the global economic and financial crisis, there is evidence of non-Keynesian fiscal policy in the case of the EMU (expansionary fiscal consolidation), while it does not hold in the case of the US. Third, there is evidence supporting the traditional inverse relationship between monetary policy interest rates and inflation in the case of the US, whereas in the case of the EMU there is a price puzzle (frequent in SVAR studies). Fourth, the baseline model seems to be robust in the case of the US, when considering the effects of the economic and financial crisis 2007–2009, while the opposite holds in the case of the EMU. However, in both cases, the policies seem to act as complements. Another similarity appears when analysing the relationship between public spending and taxation, where there is evidence supporting a fiscal retrenchment. info:eu-repo/semantics/publishedVersion

Focus on monetary policy transmission mechanism has regained its importance especially in regards to fi nancial and debt crisis. Negative developments after 2008 still verify the ability of monetary policy to mitigate its impacts. In EMU, it can be seen in the case of the effects of single monetary policy and the deepening of the asymmetries between member countries. This can be compared to the case of the monetary policy ef fi ciency in small and open non-member country and its in fl uence on macroeconomic developments. This paper is focused on the analysis of transmission process of monetary policy through the interest rate channel in EMU as well as in a non-member country, namely in Czech Republic. The aim of the analysis was to verify the similarity of reaction in case of monetary policy shock. The results for Czech Republic were compared to results for overall EMU. The focus was predominantly on interest rate channel of monetary transmission process and its impact on in fl ation, nominal effective exchange rate and gross domestic product, the variables that are typically used in central banks’ monetary rules. We also assumed that negative developments related to the crisis can distort the transmission of monetary policy effects on macroeconomic variables and that the impact of monetary policy changes is transmitted to the economic variables only partially or signi fi cantly lagged. The effects of interest rate shocks on selected variables were identi fi ed by estimating VAR model that uses Cholesky decomposition of innovations; the most widely used empirical methodology for analysing the transmission mechanism of monetary policy. The results show that the reactions of the product and the price level to positive interest rate shock are very similar for Czech Republic as well as for EMU throughout the investigated period 1999–2013. However, we cannot de fi nitively af fi rm that the crisis disrupted the transmission process from monetary measures to analysed macroeconomic variables as shown in the cases of Czech Republic and EMU. Interest rate channel has not shown particularly strong and stable in fl uence on the observed variables neither for Czech Republic, nor for EMU.

Both Japan and parts of the European Monetary Union have experienced boom and bust in stock and real estate markets, which have been followed by a lasting crisis. The paper analyses the role of a high degree of regional heterogeneity for public debt and monetary policy in the context of crisis. It is shown for Japan that the attempts to maintain regional cohesion via a regional transfer mechanism has contributed to the unprecedented rise in public debt and persistent monetary expansion. Econometric estimations show that in Japan regional redistribution of funds has ensured homogeneous living conditions across Japanese regions pre- and post-crisis. The side condition is monetary expansion. A similar effect could emerge in Europe, if the crisis persists.

This paper demonstrates that, after integration, equity portfolios of countries that joined the European Monetary Union have converged at faster rate than those of NON EMU countries. This outcome can be interpreted as a combination of the convergence of inflation rates and the convergence of investment barriers. On the one hand, the common monetary policy might have driven a stronger co-movement in inflation rates, leading to increasingly similar hedging strategies among member countries. On the other hand, exposure to the common currency might have homogenized bilateral investment barriers, thus inducing increasingly similar portfolio allocations among member countries. We find that the co-movement of inflation rates has not significantly increased after EMU inception, pointing toward an exclusive role for convergence in investment barriers.

This article provides an overview of recent research into the macroeconomic costs and benefits of monetary unification. We are primarily interested in Europe's monetary union. Given that unification entails the loss of a policy instrument, its potential benefits have to be found elsewhere. Unification may serve as a vehicle for beneficial institutional changes. In particular, it may be a route toward an independent monetary policy, which alleviates the scope for political pressure to relax monetary policy. Unification also eliminates harmful monetary policy spillovers and competitive devaluations. We explore how disagreement between the monetary and fiscal authorities about their policy objectives can lead to extreme macroeconomic outcomes. Further, we pay considerable attention to the desirability (or not) of fiscal constraints and fiscal coordination in a monetary union. Monetary commitment and fiscal free riding play a key role in this regard. Similar free-riding issues also feature prominently in the analysis of how unification influences structural reforms. We end with a brief discussion of monetary unification outside Europe. The cost–benefit trade-off of unification may differ substantially between industrialized and less-developed countries, where differences in fiscal needs and, hence, the reliance on seigniorage revenues may dominate the scope for unification.

Globalizacija, izgradnja monetarne i ekonomske unije te gospodarska kriza, trendovi su s kojima je trenutno suočena Europska unija. Upravo je gospodarska kriza bila razlog zbog kojeg se sveprisutna deregulacija zamijenila reregulacijom te se ponovnim uspostavljanjem pravila pokušava zaštiti cjelokupna integracija i njena ekonomija. Samu regulaciju i njeno jačanje Europska unija provodi kroz svoj zakonodavni, supranacionalni okvir. Posljednja ekonomska kriza osvijetlila je sve slabosti postojećeg stupnja integracije na području Europske unije te je pokazala kako su promjene unutar monetarne i fiskalne komponente ekonomske politike te jačanje njihove interakcije nužne želi li se postići pametan, održiv i uključiv rast. Aktivnosti poduzete od strane Unije ogledaju se kroz dizajniranje financijske arhitekture stabilnosti odnosno osnivanje institucija poput Europskog fonda za financijsku stabilnost (EFSF), Europskog stabilizacijskog mehanizma (ESM) te Mehanizma za europsku financijsku stabilnost (EFSM). Nadalje, pojačan je nadzor monetarnih financijskih institucija EU-a kroz formiranje bankovne unije, a ESB izlazi iz neutralne pozicije promatrača te aktivno sudjeluje u borbi protiv asimetričnih šokova. Sljedeći izazovi Unije jesu formiranje unije tržišta kapitala te fiskalne unije za što je potrebna politička hrabrost i dosljednost koja će voditi ka većem stupnju integriranosti i ujedinjenoj Europi. Globalization, the construction of the monetary and economic union and economic crisis represent the trends that European Union is currently facing. The main reason for the introduction of reregulation were the unfavorable effects of the economic crisis. The purpose of the new rules was the protection of European economy and its integrity. The regulation itself is being rated on a supranational level. The last economic crisis has highlighted all the weaknesses of the current level of integration in the EU and has showed that changes in the monetary and fiscal policies, as well as the strengthening of their interaction, are necessary if smart, sustainable and inclusive growth want to be achieved. The actions taken by the Union are represented by the design of the financial architecture of stability and the establishment of institutions such as the European Financial Stability Facility (EFSF), European Stability Mechanism (ESM) and European Financial Stabilisation Mechanism (EFSM). Furthermore, higher level of supervision on monetary financial institutions of the EU has taken place through the establishment of banking union whilst the ECB has abbandoned its neutral position of the observer and has started actively participating in the battle against asymmetric shocks. The next challenges of the EU are forming the capital markets union and fiscal union, but those steps require political courage and consistency if greater degree of integration and European unity want to be reached.

In this article, the issue of the monetary independence problem in view of the Romania's European Monetary Union accession is investigated empirically. It is frequently argued that for such a country, the main cost of participation in a currency area is the loss of monetary policy independence. This article raises the question of the actual possibility of monetary independence in a small open economy operating within highly liberalized capital flows and highly integrated financial markets. The main hypothesis of the article is verified using the vector error-correction mechanism model and several parametric hypotheses concerning the speed and asymmetry of adjustment to verify the risk premium and the nature of transmission of the Euribor interest rates on the Romanian Robor. The hypothesis of a one- to-one relationship between interest rates between Romania and the Eurozone cannot be rejected, despite the rapid disinflation at the beginning of the sample.

The EMU fiscal system is specific in many areas compared to other classic fiscal systems of national states. Specific features mainly reflect in the implementation of economic policy within the EMU which is carried out by combining a common centralized monetary policy under the ECB jurisdiction and decentralized fiscal policies under the jurisdiction of the member states. The member states` sovereignty in governing their fiscal policies is one of the key causes of the EU fiscal system underdevelopment, i.e. its indigent structure in relation to “standard fiscal systems”. More indigent structure of the EU fiscal system is reflected in the fact that it consists of only three segments. The first one refers to the EU budget which is also the only instrument for implementing fiscal policy at the supranational level. The second one refers to the harmonization of taxation systems in accordance with inputs and other legislation adopted at the EU level with the aim of fostering the single internal market. Finally, the third segment refers to the fiscal policy coordination of the EMU member states related to appropriate fiscal rules, which mainly stem from the Maastricht convergence criteria and the Stability and Growth Pact.

The potential importance of fiscal policy in influencing inflation has recently been highlighted, following Woodford (1998), under the heading of the ‘Fiscal Theory of the Price Level’ (FTPL). Some authors have suggested that this theory provides a rationale for the Pact for Stability and Growth as a necessary condition for the ECB pursuing a policy of price stability. In this paper, we relax the assumptions underpinning the FTPL by developing a two country open economy model, where each country has overlapping generations of non-Ricardian consumers who supply labour to imperfectly competitive firms which can only change their prices infrequently. We examine the case where the two countries have formed a monetary union, but where the fiscal authorities remain independent. We show that the fiscal response required to ensure solvency is greater when consumers are not infinitely lived, and that although this allows for some compensating behaviour between governments, in general, both fiscal policies must remain solvent if the ECB is to aggressively target inflation. We also show that the monetary authority can abandon its active targeting of inflation to ensure the solvency of at most one fiscal authority. Any other combination of policies will either result in price level indeterminacy and/or indefinite transfers of wealth between the two economies. Finally, in a series of simulations we show that fiscal shocks have limited impact on output and inflation provided the fiscal authorities meet the (weak) requirements of fiscal solvency. However, when monetary policy is forced to abandon its active targeting of inflation, then fiscal shocks have a much greater impact on both output and inflation.

This paper presents the salient aspects of Finland?s monetary and exchange rate policies during the run-up to monetary union in the 1990s. In the course of slightly more than a decade, Finland?s monetary and exchange rate policies were thoroughly revamped. There were serious problems associated with the liberalisation process in the early part of the decade, the most noteworthy being an economic and banking crisis. Finland?s financial system nonetheless developed rapidly. As regards exchange rate policy, almost all varieties of exchange rate regime were tried. A fixed rate regime based on a currency index fell apart in the early part of the decade and was replaced by a floating rate system. Later, in 1993, this was combined with an inflation-targeting monetary policy strategy. At the start of 1995 Finland joined the European Union, and in October 1996 the markka was joined to the EU?s Exchange Rate Mechanism. The improvement in financial and price stability that followed the economic crisis facilitated the adjustment to the euro area?s single currency and single monetary policy at the start of 1999, which was accomplished without serious problems.

With a two-country dynamic model in a monetary union with wealth private behaviors, we study the implications of public debt on monetary and fiscal policies. The model used has Keynesian features in the short run and Wicksellian ones in the long run. We analyse the effects of asymmetric fiscal policies in Euroland and show that such a situation creates two feedback effects which reduce the efficiency of economic policies. First, because of the inability of one government to implement an expansionary fiscal policy, the other government has to substitute for it to reach economic targets. Second, the ECB's involvement in macroeconomic stabilisation will be exacerbated. The more substantial these effects, the more coordination is needed between European governments and the ECB.