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Über dieses Buch

The treaty of Maastricht envisages the full economic and monetary union in Europe. With increasing real and monetary integration policy decisions in individual member countries tend to have a growing impact on the other member countries of the European Community. Against this background the following study analyses within a unified theoretical framework the impact of monetary and fiscal policy pursued by one country on its own macroeconomic performance as well as on those of the other member countries and of the rest of the world. The analysis contrasts the cases of a small and a large European union relative to the rest of the world and distinguishes very clearly between the short-run, the medium-run and the long-run effects. Based on this the consequences for union cohesion and the scope for policy coordination are discussed. Since the analytical framework is defined by a three country model many results from the traditional policy coordination literature which relies on two country models are qualified. In contrasts to most previous research in this area particular attention is paid to the implications of asymmetries between the EC member countries. Furthermore, the structural parameters are in some instances not taken as given but as responsive to the integration process. In this context numerous links to the traditional literature on optimal currency areas are established and interesting implications for union cohesion during the transition are derived.

Inhaltsverzeichnis

Frontmatter

Introduction

Abstract
In which ways do macroeconomic policy changes in one country belonging to an exchange rate union affect its own macroeconomic performance, that of the other members and that of the countries extraneous to the union? Can the countries improve their performance by taking into account the reciprocal policy spillovers? How do the transmission and coordination of macro-economic policy changes affect the exchange rate union cohesion?
Valeria De Bonis

Chapter I. The State of the Art

Abstract
This chapter contains an exposition of the “state of the art” of the literature on exchange rate and monetary unions. Given the large amount of work on the topic, this illustration does not aim to be complete, but to offer some examples of the main issues tackled.
Valeria De Bonis

Chapter II. An IS-LM-AS Model for a “Small” Exchange Rate Union

Abstract
The following is an analysis of stabilization policy in an exchange rate union and an attempt to link the micro- and macroeconomic aspects of the problem. The role played by the rest of the world is also considered. This is accomplished using an IS-LM-AS three-country model, in which no symmetry in the union member-countries is assumed, similar to that developed in De Bonis (1992). This allows the study of the problem of the union cohesion, with respect to the efficacy of policy and its relationships with the mobility of factors and the incidence of economic shocks.
Valeria De Bonis

Chapter III. Monetary and Fiscal Policy in a “Small” Exchange Rate Union a Strategic Analysis

Abstract
In this chapter a model describing the strategic interactions between two countries forming an exchange rate union will be developed. The two countries are supposed to be subjected to exogenous disturbances coming from the rest of the world and pursue their targets using policy instruments, the change of which also affects the other member’s targets. The system of interdependence is derived from chapter IPs model, i. e. a modified version of the two-country Mundell-Fleming model as adapted to the exchange rate union case with the introduction of the third component “rest of the world” by means of exogenous variables. In particular, the medium-run version of the model will be used, as the most idoneous for the purpose of analysing policy interactions. This distinguishes the system of interdependence from the two-country ones used in the already existing literature, as, for instance, in Niehans (1968), Hamada (1974, 1976), Corden (1978).
Valeria De Bonis

Chapter IV. An IS-LM-AS Model for a “Big” Exchange Rate Union

Abstract
Up to now it has been assumed that the monetary union was not “big” enough, in economic terms, to affect world economic variables, therefore considered exogenous. Abandoning this assumption involves taking into account the effects of the union policy operations on the rest of the world and their repercussions on the union itself This requires the use of a three-component model in the real sense of the word, i. e. a model in which the relevant variables of all countries are endogenous. Examples of this type are to be found in Gries (1989) and Herberg (1991) in the context of international trade, Canzoneri/Henderson (1991) in that of international policy coordination and Wohltmann (1994) in that of exchange rate union dynamic modelling. This new system of interdependence can be given a visual representation, illustrated by Fig. I. Union member-country 1’s economic changes affect both union member-country 2 and the rest of the world. The same is true for the other two components.
Valeria De Bonis

Chapter V. Monetary and Fiscal Policy in a “Big” Exchange Rate Union a Strategic Analysis

Abstract
In this chapter the strategic interactions between two countries forming an exchange rate union and the rest of the world are analysed. Each country pursues its targets using policy instruments, the change of which also affects the other countries’ targets. The system of interdependence is derived from the model studied in chapter IV, the introductory section of which is to be referred to for references to the literature on the policy coordination debate. The medium-run results of the model will be used, as the most idenous for the purpose of analysing policy interactions.
Valeria De Bonis

Conclusions

Abstract
The purpose of this work was to analyse the effects of monetary and fiscal policies undertaken by an exchange rate union member-country on its own macroeconomic performance, that of the rest of the union and of the countries not belonging to it; the possibility of improving this performance by policy coordination; and the influence that this exerts on the union cohesion.
Valeria De Bonis

Backmatter

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