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Pandemic responses within the EU deviate from past large-scale crisis management substituting the austerity paradigm with the normalisation of generous fiscal support. Yet, traditional north-south fault lines remain. The article addresses such a puzzle systematically assessing the core-periphery divide in pandemic management and outcomes across the EU 27. The analysis highlights gaps and geographical heterogeneities across the north-south divide, refuting their sole attribution to differences in the scale of the health crisis. Conversely, we show the contribution of containment measures to heterogeneous economic outcomes across the core and periphery, which extend to the Southern Member States marginally impacted by the outbreak. Findings confirm the pandemic furthered divergences across the Member States, highlighting how the absence of austerity alone is not sufficient to enact convergence within the EU27. Supporting structural imbalances and the need for transnational solidarity, the work contributes to the debate on core-periphery relations and the future of economic integration in the context of the Conference on the Future of Europe and foreseen reform of the Stability and Growth Pact. [ABSTRACT FROM AUTHOR]

In retrospect and erroneously the nineteenth century international gold standard was interpreted as a quest for monetary discipline. The discipline argument was introduced after WWI in support for a restoration of the gold standard. The interwar failure led to an emphasis on international balances, the argument which came to the fore in the preparations for the Bretton Woods system. The balance argument was central in the early discussions of monetary union in Europe, but with the criticism of Keynesianism the discipline argument became determinant in the design of the Economic and Monetary Union. [ABSTRACT FROM AUTHOR]

The COVID-19 pandemic raises the question of austerity's problematic social toll for health in the south of Europe. Has EU economic governance constrained health spending? If so, have these spending levels led to inequalities, which in turn shaped responses to the pandemic? EU economic governance is often dismissed as ineffective because of its poor track record of compliance. Yet austerity is blamed for negative health outcomes. This article shows that the EU fiscal rule is a determinant of health because it affects fiscal policies of European countries. First, the analysis of EU member states during 1995-2018 shows that austerity policies affect health spending and health inequalities. Euro-area countries under the EU Excessive Deficit Procedure significantly consolidated their health spending. The contractionary effect was concentrated in southern countries, contributing to rising health inequalities across the core and periphery. Finally, the analysis shows the pandemic implications of health inequalities, as periphery countries with a track record of high consolidation display more stringent (and costly) COVID-19 response models. This analysis contributes to understanding the supranational determinants of health in the EU, showing the pervasive spillover effects of the fiscal framework on national health policies., (Copyright © 2024 by Duke University Press.)

The sovereign debt crisis since the late 2000s in the Euro Area revealed that, in reality, there are two monetary unions in Europe: the core and the periphery. The core-north countries have sounder fiscal balances and lower inflation rates, whereas the periphery-south ones are more prone to higher inflation and public deficits. The principal aim of this paper is to explore which countries handle the nominal exchange rate of the euro. By doing this we will effectively challenge the statement '.one size fits all' upon which the euro project was built. We used the real exchange rates of the initial 12 Eurozone members as an empirical instrument. Our evidence is based on the bivariate regression analysis and the Asymmetric Component GARCH (AC-GARCH) model. We discovered that the countries of the Eurozone core influence more the euro nominal exchange rate than the periphery ones. In addition, the euro is more vulnerable to the volatility shocks of the German and the French real exchange rates. [ABSTRACT FROM AUTHOR]

The European crisis is the best case study for examining both the vulnerabilities of Europe's framework for economic governance and the very process of European integration itself. This statement is true for several reasons: first, because the European crisis is the most serious crisis the European Union has faced to date; second, because of the crisis, limits on the process of economic integration in Europe have been put to a real test; and third, because the main causes of the crisis are tied into the framework for economic governance that has been developed over the last few decades and therefore are connected to the very process of European unification itself. The primary aim of this paper is to demonstrate whether and to what extent the new framework for economic governance in Europe is largely a result of interstate bargaining and consequently whether national preferences continue to play an important role in the framework's general transformation. The economic crisis showed that important issues in economic policy concerning the change in economic governance and the role of the nation-state, which were ‘swept under the carpet’ in recent decades, must be resolved to make the European venture viable. [ABSTRACT FROM PUBLISHER]

Domestic opportunity structures and political actors’ positions are widely regarded as the most important explanatory factors for EU politicisation. The euro crisis, however, has revealed cleavages across rather than within countries, suggesting structural factors as a potential explanation for politicisation. Based on the political economy literature on Europe’s Economic and Monetary Union, this contribution develops a structural approach to politicisation with respect to countries’ power and variety of capitalism. Using a content and claims analysis of business papers in Germany, France, Austria and Ireland before and during the crisis, the findings reveal a differentiated pattern of politicisation. While an expansion of actors indicates that EMU became more politicised during the crisis, polarisation remained low within countries. Countries’ variety of capitalism and their perceived power in the EU largely explain the substance and objects of politicisation. The findings encourage further research considering structural explanations for differentiated politicisation in less elite-centred settings of politicisation. [ABSTRACT FROM PUBLISHER]

Copyright of Pôle Sud is the property of Centre Comparatif d'Etudes sur les Politiques Publiques et les Espaces Locaux and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Europe's Economic and Monetary Union (EMU) has been struck by one financial crisis after another. Yes despite many bold new initiatives, instability and uncertainty persist. Why can't Europe save itself? The answer, this chapter argues, lies in a structural failure. EMU lacks a credible mechanism to cope with the threat of imbalances within the group – a framework to manage the European region'sinternalpayments problems. The challenge was foreseen from the beginning. How could a regional monetary union manage the risk of fiscal imbalances among its members? Europe might have turned to the USA for inspiration. For analytical purposes, the USA too can be considered as a regional monetary union comparable to EMU, facing the same fundamental challenge. America's solution was to create a permanent ‘transfer union’, featuring more or less automatic flows of funds through the federal budget at the centre. But European policy-makers chose otherwise, for reasons that go to the very heart of their ongoing integration project. EMU is a league of sovereign states, each determined to retain for itself as many rights and privileges as possible. In such a structure, a permanent transfer union never had a chance; and since no adequate substitute has yet been found, Europe is forced to pay a high price in terms of instability and lost growth. [ABSTRACT FROM PUBLISHER]

This paper presents empirical evidence indicating that German and Spanish government bond yields are cointegrated. Thus, a stable long-term equilibrium relationship among these two variables seems to exist. However, there is also empirical evidence for the existence of a structural break in early 2009. Following Basse, Friedrich and v. d. Schulenburg (2011) we interpret this finding as an indication that financial markets started to see a higher sovereign credit risk in Spain. The structural break may even signal some fears about the return of exchange rate risk. Given that the break date is quite early; our empirical findings could be an indication that bond markets are at least partially efficient. [ABSTRACT FROM AUTHOR]

This article examines the association between trade and financial linkages among 18 European countries. We find that, with the introduction of the euro, trade imbalances among euro area members widened considerably, even after allowing for permanent asymmetries in trade competitiveness within pairs of countries or in the overall trade competitiveness of individual countries. Moreover, there is a significant relationship between patterns of trade and bilateral financial linkages, especially within the euro area; a surplus of a country in a bilateral trade relationship is typically accompanied by a country’s positive net financial position vis-à-vis the respective partner country. (JEL codes: F15, F16, F32, F36, F42) [ABSTRACT FROM AUTHOR]

The conventional narrative for the European debt crisis stresses three factors, namely, bad policies and profligacy in the afflicted countries - mostly southern ones, flaws in the EMU design, and wise policies in the northern frugal countries. This paper argues that the root causes of the crisis lie in the failure of many "safety valves" of market economies, at many levels of the society, both in the crisis countries and in the more "prudent" EMU countries, in an economic environment where unfettered finance can overwhelm even the biggest and best managed economies. Hence, the policy responses based on the conventional narrative are akin to treating the "symptoms", not the "disease". As such, they may be setting the foundations for a bigger crisis in the future by strengthening the always-present perverse incentives of many economic players and by proposing complex and unworkable regulatory and supervisory structures. This, together with the unequal sharing of the burden of adjustment - both across and within countries, bodes ill for the long-term prospects of EMU, despite that the aforementioned failures are not intrinsically related to the euro. [ABSTRACT FROM AUTHOR]

EU member states desiring deeper integration often call for a multispeed approach to pursue ambitious projects without the hinderance of laggards. At other times, laggards have desired a multispeed approach to avoid policies they find objectionable. Under what circumstances do laggards (integrationists) propose (object) to a multispeed Europe? We investigate the institutions and member state preferences that lead these camps to accept or resist multispeed proposals, paying particular attention to how a multispeed approach affects member state bargaining power. We present a series of case studies to demonstrate that the preference configurations we examine do, in fact, lead states to pursue the policies with regard to a multispeed Europe that we expect. [ABSTRACT FROM AUTHOR]

This article is aimed at deconstructing the widely spread view according to many media outlets, policy analysts and commentators that the Greek crisis and the subsequent eurocrisis is the result of generous social welfare benefits and fiscal spending irresponsibility on the part of Greek politicians and citizens. The lesson to be drawn from this analysis is multifold. In attempting to do so, I will use critical theory of international relations in order to dissect the very structure of the EMU which inevitably led to the build-up of trade and fiscal imbalances in the EU's periphery as a first theoretical line of argumentation in contesting this view. The second theoretical line of argumentation focuses on social constructivism and its credentials in dealing with the underlying issue of "Greek profligacy". The diffusion of conservative attitudes regarding social welfare is put into the broader context of "new constitutionalism" and neoliberal politics. The application of both theories is aimed at identifying basic culprits which brought about the deadly mix of European banking crisis and sovereign debt crisis, and thereby points to a necessary change in policy stance toward "PIIGS" countries and the very foundation of the EMU. [ABSTRACT FROM AUTHOR]

Economic and Monetary Union (EMU) has a unique set up: while the monetary policy is centralised at the Union-level, the fiscal policies are left to the member states within the limitations of the Stability and Growth Pact. The Commission argues that within time EMU would constitute an optimum currency area, and further centralisation of fiscal policies, thus, is not needed. Fiscal federalism literature, on the other hand argues that stabilisation functions should be centralised, since no individual would be able to deal with an asymmetric shock without harming another member. Therefore the fiscal policy centralisation should accompany the monetary centralisation. This study tries to assess whether the EMU has become more symmetric over time. By proposing a centralised insurance against asymmetric shock, and linking the trend of the stabilisation provided by the insurance scheme to the ability of EMU to absorb asymmetric shocks, the results of the study suggests that EMU has become more symmetric over time. [ABSTRACT FROM AUTHOR]

While European integration is a fast changing subject, commentators have not looked back to evaluate self-critically those predictions and policy advice in the past. The theme of economic governance in economic and monetary union is a good candidate for such a revisit,such as the theory of the" advantage d tying one's hands" has obviously influenced our understanding of monetary integration in theory and the building of EMU institutions in practice, which explained why and how a stability - oriented exchange rate regime could act as disciplinary device for a high - inflation country. We can identify an underlying dilemma of non - majoritarian policy - making in democracies for which academic policy advice is both a curse and a cure. [ABSTRACT FROM AUTHOR]

Involvement of the state in the domestic economy has long been considered as useful for enhancing public welfare in modern society. However, since the 1980s the expenditures devoted to support the domestic economy show a downward and converging development in most OECD countries. This development is examined by means of a comparative analysis over time. Three possible explanations are analysed: firstly, the 'politics' of fiscal stringency in order to curb 'big' government; secondly, the impact of trans-national pressure, in this case from the EMU; and thirdly, the impact of party politics and government in relation to budget choices that affect spending levels on state economic support. The analysis demonstrates that lower levels of state economic support are because of the development of total government outlays and consequently non-welfare or 'core' expenditures are traded off in favour of welfare spending. Furthermore, EMU requirements affect this development. Finally, these developments vary cross-nationally owing to where a 'policy legacy' of the Left (high levels of public spending) existed before the 1980s and where the Right is present in government after 1980. [ABSTRACT FROM AUTHOR]

This paper analyzes the evolution of per capita income inequality among 197 European regions between 1977 and 2003, and seeks evidence of the relationship between the European Economic and Monetary Union (EMU) and interregional income inequality. The conclusion is that overall interregional income inequality has decreased since 1977, owing to a decrease in between-country inequality. The panel analysis conducted in this paper suggests that the adoption of the common currency has, thus far, exacerbated regional inequality in poorer EU countries, while it has not significantly affected regional inequality within richer countries. Inequality in less advanced countries has also increased with the establishment of the convergence criteria and with the implementation of the Single Market. [ABSTRACT FROM AUTHOR]

We examine whether the EMU has led to greater labour market flexibility, differentiating between reform that enhances the capacity of an economy to adjust to economic shocks and reform that aims to increase long-run output. Based on a panel model and using OECD data on labour market reforms for 27 OECD countries over the period 1994-2004, we find that the two types of labour market reform are driven by different variables. Most importantly, our results suggest that the EMU has had no effect on reform that enhances the economy's capacity to adjust to shocks. Most of our evidence for reform that increases long-run output suggests that the EMU has not affected this type of reform either. [ABSTRACT FROM AUTHOR]

Copyright of Revue d'Economie Politique is the property of Editions Dalloz Sirrey and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Disparities, imbalances and tensions between EU members are not a new phenomenon or, solely due to the ongoing global financial and economic crisis; rather, they emerged already just after the third stage of EMU has been implemented. The first signs of imbalances could be observed in increasing current account imbalances of all EMU member countries, and increasing trade imbalances in intra-EU trade. The recent crisis added imbalanced public deficits and unsustainable debt levels in some countries. The analysis of the problems will be based on the theory of voice and exit, applied to the institutional framework of the EU. It will be argued that the current EU framework is characterized by an imbalance of voting rights and inflexibilities. This conclusion will be applied to the discussion of recent reform proposals, like an EMF, a fiscal transfer system, or a more centralized economic policy. [ABSTRACT FROM AUTHOR]

The political economic literature on EMU suggests that its sustainability depends on the consolidation of the member states into a political community, based on shared beliefs in neo-liberal values, as well as the development of strong EU institutions and a well-integrated and liberalized common market. Have national governments in the EU become less favourable to policies that accordingly contribute to the sustainability of EMU? A dataset including 15 pre-2004 member states during 1990-2006 shows that, while the member states of the euro zone have in recent years converged in support of macroeconomic policies that are important for a sustainable EMU, they have also become more divergent about imperative microeconomic policies, and their scepticism with regard to the authority of EU institutions has become more consensual. This may challenge the sustainability of EMU. This study is innovative in its original government orientation analysis and large dataset. [ABSTRACT FROM AUTHOR]

There is only a sparse literature on the determination of real exchange rate volatility, and little attention has been given to the possible impact of EMU on volatility of real exchange rates of EU countries. A number of papers suggest a negative impact of exchange rate volatility on investment or growth, for advanced as well as developing countries, although we note that price and wage adjustment that might link to real exchange rate volatility is also part of the adjustment mechanism to macroeconomic shocks in EMU. We assess whether an effect of EMU on conditional volatility of real effective exchange rates can be detected, both for EMU and non EMU members. We find that the advent of EMU was accompanied by a reduction in conditional real exchange rate volatility for most EMU countries, as well as Sweden and Denmark that did not join EMU, but did not lead to a reduction in real rate volatility for Germany, Belgium, the Netherlands, nor, outside EMU, for the UK. [ABSTRACT FROM AUTHOR]

We study the evolution of price level dispersion in Europe by combining time-series information on harmonized indices of consumer prices (HICPs) with occasional observations of absolute price levels. We find that European price levels converged over much of the last 40 to 50 years. In the United States, our benchmark, price level dispersion is more or less stable. A back-of-the-envelope calculation suggests that indirect tax rate harmonization, convergence of nontraded input costs, and convergence of traded input costs (in the form of exchange rate stability and increased openness) are all important in explaining European price level convergence. [ABSTRACT FROM AUTHOR]

Using unit labor cost (ULC) data from Euro area countries as well as US States and German Länder we investigate inflation convergence using different approaches, namely panel unit root tests, cointegration tests and error-correction models. All in all we cannot reject convergence of ULC growth in EMU. However, country-specific deviations from the rest of the currency union are much more pronounced and much more persistent in Europe than in the US or Germany. This holds before and after the introduction of the common currency. Hence, asymmetric shocks in the future might take a long time to dissipate. [ABSTRACT FROM AUTHOR]

Following entrance into the European Union, Central Eastern European Countries (CEECs) are expected to join the European Monetary Union (EMU). These countries may incur considerable costs over the course of their passing through the required Exchange Rate Mechanism II (ERM-II). However, with enough bargaining leverage, CEECs may be able to pass some of these costs on to current EMU members. In turn, a CEEC's leverage depends on its ability to wield successful brinkmanship via an exchange-rate policy characterized by a "threaten-thy-neighbor" strategy. A two-stage Nash-threat game captures the essentials of the CEECs' phase of ERM-II pass-through. [ABSTRACT FROM AUTHOR]

The deregulation of financial services in the European Union and the development of information technology have fostered recent changes in the European banking industry. This process, that has affected market competition, has been accelerated by the establishment of the Economic and Monetary Union (EMU). This paper makes a comparative analysis of the market conditions for banking sectors in Spain and France (EMU participation countries) and UK and Denmark (not participating in EMU) in order to assess the effects of the adoption of the Single currency in banking market conditions. This comparison is made distinguishing between commercial banks and non-profit financial institutions. [ABSTRACT FROM AUTHOR]

The effectiveness of any device for fiscal discipline crucially depends on the indicators it refers to. This paper assesses the indicators adopted for fiscal rules in the European Economic and Monetary Union (EMU) with respect to their relevance for EMU’s objective of fiscal soundness and to the adequacy of the underlying statistical framework in providing conditions for enforcement. The paper argues that EMU’s deficit and debt indicators present several shortcomings with respect to both sustainability analysis and monitoring requirements. The debt indicator allows the achievement of targets via operations that do not improve fiscal sustainability and tends to underestimate overall outstanding liabilities. The deficit indicator cannot be monitored in a timely manner, allows too much room for discretion, and is subject to significant revisions. While acknowledging that any single indicator can be distorted when used as a policy target, the paper argues that the weaknesses of EMU’s indicators would be much reduced if consistency cross-checks played a larger role than they currently do. [ABSTRACT FROM AUTHOR]

Most empirical studies find that country effects are larger than industry effects in stock returns, although industry effects have gained in importance recently. Our results support the dominance of country effects relative to industry and common effects in the EMU equity markets in the 1975–2001 period. However, there is an increasing importance of industry effect relative to country effect in the 1990s. In fact, industry effects is similar in magnitude to country effect in the post-euro period. The evolution of the ratio of country to industry effect is explained by the decrease in the cross-sectional variance of interest rate movements across EMU countries. Thus, there is evidence that nominal convergence has reduced the differences between national equity markets. [ABSTRACT FROM AUTHOR]

During the 1990s, wage setting increasingly became coordinated in many Member States of the European Union (EU), often through new arrangements involving broad encompassing social pacts between employers, trade unions, and governments striking deals across policy areas from wages to social and employment policies. We argue that the different forms of institutional innovation in wage setting found in the EU depended on the combination of the character of external pressures and preexisting proto institutional structures in the labor market. The shifts in the institutions of wage-setting and macro-level labor market governance were directly related to shifts in macro-economic policy regimes, especially political-economic pressures associated with the advent of Economic and Monetary Union (EMU). Because these pressures were not symmetrically distributed across the different EMU candidates, both the urgency of the problems and responses they produced differed. Microinstitutions conditioned the ability of countries to "embed' these new arrangements in stable rule-based governance structures. [ABSTRACT FROM AUTHOR]

Conventional wisdom blames Germany's ongoing economic and fiscal crisis on the unification shock of the early 1990s and structural problems in labour markets. Challenging this view, this paper offers a fresh assessment that focuses on macroeconomic demand management. It is shown that Germany's fiscal crisis cannot be attributed to unification per se; it arose as a consequence of ill-guided macroeconomic policies pursued in response to that event. Many structural problems that popped up along the way were mere symptoms of persistent macroeconomic mismanagement and protracted domestic demand stagnation. Arguably, systematically ill-guided macroeconomic policies of this type are potent enough to wreck any real world economy, no matter how flexible it may be. Because Germany provided the blueprint for Europe's stability-oriented macroeconomic policy regime, it comes as no surprise that a peculiar repeat of certain symptoms that started to arise in Germany a decade ago may now be observed across the euro area--protracted domestic demand weakness and inflation stickiness because of 'tax-push inflation' in particular. [ABSTRACT FROM AUTHOR]

Europe's economic governance is not only highly complex, but also increasingly inefficient and therefore unsustainable in the long run. This conclusion is reached from the theory of collective action and the difficulties in democratic legitimacy. The solution would be the creation of a European government accountable to European citizens. [ABSTRACT FROM AUTHOR]

Globalization is widely held to circumscribe the parameters of political and economic choice in contemporary Europe, just as it has come to circumscribe the parameters of debate on the future of European models of capitalism. Yet opinions on the question of convergence nonetheless vary markedly, with proponents of the hyperglobalization thesis pointing to a simple and inexorable process of neoliberal convergence while an increasingly influential school of neo-institutionalists point to a rather more complex process of 'dual' or 'co-convergence', reinforcing the distinctiveness of liberal and coordinated market economies. In both accounts, the exhibited pattern of convergence (dual or otherwise) is seen to be driven by globalization. In this paper I provide a theoretical and empirical critique of this important literature, challenging the contextualization of the question of convergence with respect to globalization which both perspectives share. I advance a distinctive variant of the new institutionalism which emphasizes: (i) the contingency of any process of convergence observed; (ii) the frequently political as opposed to economic nature of convergent tendencies; (iii) the counter-tendencies which might be mobilized to such tendencies; and (iv) the invariably far greater significance, in the establishment of common trajectories, of regional rather than genuinely global processes of integration. Though common trajectories are discernible within contemporary Europe, associated in particular with the institutional architecture of EMU and an accelerating process of European economic integration, they have been embraced more or less enthusiastically and at variable paces, leading not to convergent but to divergent outcomes. [ABSTRACT FROM AUTHOR]

Over the past two decades, the process of economic and monetary union (EMU) in Europe has brought the politics of exchange rates to the forefront of the policy agenda in international relations. This article will examine the significance of exchange rate policy making in Europe by considering the creation and operation of EMU as an example of club formation. There are two major benefits from viewing the process of EMU in this way. The first is that it allows a more fruitful analysis of any potential enlargement in the membership. Second, and leading on from this, it enables conclusions to be drawn regarding the optimal eventual size of the Euro area. [ABSTRACT FROM AUTHOR]

As in 1994 on the question of European Union (EU) membership, there is a split between transnational sector unions supporting European Monetary Union (EMU) and national production sector unions rejecting it. Interestingly, however, transnational production sector unions, as well as trade union confederations, no longer combine their support for membership with a strong emphasis on Europe-wide cooperation and the demand for further development of the Social Dimension. A neo-Gramscian perspective amended with a strategic-relational approach to the state is used for the analysis. While the split in the labour movement on EMU can be explained through a reference to the impact of globalization, the renewed focus of transnational labour on the Swedish form of state is due to the re-strengthened cooperation with capital at the national level and a strong economic performance of Sweden in the late 1990s as well as in 2000 and 2001. [ABSTRACT FROM AUTHOR]

Optimal Currency Area (OCA) theory offers criteria for evaluating the optimality of monetary union arrangements. This paper reviews the use that has been made of these criteria in the specific context of European Monetary Union. It reviews the use of business cycle synchronization data and the data produced by SVAR analyses, which led to the ‘core–periphery’ distinction. It also reviews extensions of the criteria that have been proposed or generated in this context: in particular, the proposition that the criteria may be ‘endogenous’. It presents Taylor rule estimates to check for inhomogeneities in Euro Area performance. The paper concludes that OCA criteria provide a useful starting point for evaluating monetary union options. Copyright © 2003 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

This paper estimates the readiness of the accession countries of Central and Eastern Europe for EMU or unilateral euroization using a fuzzy clustering algorithm. The variables to which the algorithm is applied are suggested alternately by the criteria in the Maastricht Treaty (nominal convergence) and by Optimum Currency Area theory (real convergence). The algorithm reveals that Estonia and Slovenia are the leaders in both nominal and real convergence, whereas the other countries from the 1998 accession wave have achieved substantial results only in real convergence. Moreover, Poland is excluded from the leading group in the most recent years due to its worsened economic performance. Copyright © 2003 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

This paper describes the BBVA-ARIES, a Bayesian vector autoregression (BVAR) for the European Economic and Monetary Union (EMU). In addition to providing EMU-wide growth and inflation forecasts, the model provides an assessment of the interactions between key EMU macroeconomic variables and external ones, such as world GDP or commodity prices. A comparison of the forecasts generated by the model and those of private analysts and public institutions reveals a very positive balance in favour of the model. For their part, the simulations allow us to assess the potential macroeconomic effects of macroeconomic developments in the EMU. [ABSTRACT FROM AUTHOR]

This paper proposes a theory for regional integration based on structural conditions. By applying power transition theory, we are able to account for and anticipate not only the tendency for pairs of countries to participate in integration, but the likely intensity of such integration as well. We find that integration is most likely when there is an asymmetric distribution of power between countries and when they are jointly satisfied after a power transition has occurred. These results hold even after controlling for level of development and trade flows. We test this theory on all politically relevant dyads between 1950 and 1996 using a novel method to measure the level of regional integration. We illustrate the empirical findings through simulations that track the developments leading to Europe's Economic and Monetary Union (EMU). [ABSTRACT FROM AUTHOR]

On 1 January 1999, the third and final stage of economic and monetary union (EMU) is scheduled to begin. Assuming that the member states of the European Union (EU) adhere to the terms of the Treaty on European Union, on that day a new European Central Bank will assume full responsibility for defining the monetary policy of the member states that have moved to the third and final stage of EMU and the conversion rates of the currencies of those member states will be irrevocably fixed against each other and against a new currency, the euro. This article examines some of the underlying imperatives and third-stage dilemmas of EMU. After considering some of the reasons why, despite the high costs associated with qualifying for the third stage, most if not all of the member states perceive EMU to be in the national interest, the article considers several of the economic, political, and institutional issues and dilemmas that are likely to confront the participating member states in the third stage. [ABSTRACT FROM AUTHOR]

The turmoil that engulfed the European monetary system in 1992 and 1993 extinguished the sense of inevitability that the project for economic and monetary union had acquired. The exchange rate crisis led many to conclude that monetary union had been derailed once and for all. This article argues, in contrast, that the monetary crisis did not prove that monetary union was undesired or unworkable. The travails of the exchange rate mechanism did not undo the interests that originally drove the economic and monetary union project or erase the gains it would bring to some member states. The crisis did, however, highlight the formidable obstacles to achieving monetary union in Europe. The article examines four interpretations of the 1992-3 crisis in the European monetary system, focusing especially on the failure to agree on a co-ordinated realignment that might have avoided the turmoil. It then discusses the future course of monetary union in light of the contending (though not mutually exclusive) interpretations of the crisis. Finally, it discusses the basic outlines of an economic and monetary union that might avoid some of the problems brought into relief by the exchange rate turmoil. [ABSTRACT FROM AUTHOR]