Emu-A Swedish Perspective

by Calmfors, Lars; Flam, Harry; Gottfries, Nils; Matlary, Janne Haaland; Jerneck, Magnus; Lindahl, Rutger

• ISBN13: 9780792399902
• ISBN10: 0792399900
• Format: Hardcover
• Copyright: 1997-11-01
• Publisher: Kluwer Academic Pub

Summary

EMU - A Swedish Perspective provides a comprehensive and up-to-date survey of the EMU project. The main advantages and disadvantages of a single currency are evaluated. A key feature of the analysis is the attempt to integrate economic and political aspects. The book is a revised version of the report by the Swedish Government Commission on the EMU. Although the analysis focuses on the consequences for Sweden of joining versus not joining the monetary union, it is highly relevant for the discussion in all EU countries. The book provides an in-depth analysis of how the demands on economic policy will be affected by the monetary union. Various chapters discuss monetary policy and inflation, fiscal policy, unemployment and labour markets, the transition to monetary union, and the exchange-rate arrangements between participants and non-participants. Other chapters analyse the importance of the EMU for European political integration, democratic aspects, and how membership in the monetary union will affect the possibilities for an individual member state to exert influence within the EU. EMU - A Swedish Perspective should be of interest to professional economists and political scientists, students, and all others who want to form an opinion about the monetary union on the basis of a balanced assessment of the consequences. EMU - A Swedish Perspective provides a comprehensive and up-to-date survey of the EMU project. The main advantages and disadvantages of a single currency are evaluated. A key feature of the analysis is the attempt to integrate economic and political aspects. The book is a revised version of the report by the Swedish Government Commission on the EMU. Although the analysis focuses on the consequences for Sweden of joining versus not joining the monetary union, it is highly relevant for the discussion in all EU countries.

Author Biography

Lars Calmfors is Professor of International Economics and Director of the Institute for International Economic Studies at Stockholm University Harry Flam is Professor of International Economics and Deputy Director of the Institute for International Economic Studies at Stockholm University Nils Gottfries is Professor of Economics at Uppsala University Janne Haaland Matlary is Associate Professor in Political Science and directs the research group on EU policy at ARENA, University of Oslo Magnus Jerneck is Associate Professor at the Department of Political Science, Lund University Rutger Lindahl is Professor of Political Science and Director of the Centre for European Research at Gothenburg University Christina Nordh Berntsson is Head of the International Secretariat at the Riksband (the Swedish central bank) Ewa Rabinowicz is Associate Professor of Agricultural Economics at the Swedish University of Agricultural Sciences

Table of Contents

1 INTRODUCTION	1	(6)
1.1 The aim of the book	1	(1)
1.2 The structure of the book	2	(5)
2 THE EMU PROJECT	7	(12)
2.1 Economic and monetary co-operation in Europe in a historical perspective	7	(3)
2.2 The Maastricht Treaty: objectives, timetable, and convergence criteria	10	(3)
2.3 The role and organisation of the European Central Bank	13	(2)
2.4 Other central EU institutions and bodies	15	(2)
2.5 The reference scenario - a detailed plan for the transition to the monetary union	17	(2)
3 CURRENCIES AND EXCHANGE-RATE SYSTEMS - A BACKGROUND	19	(22)
3.1 The role of a national currency	19	(8)
3.2 Exchange-rate systems	27	(3)
3.3 Experiences of different exchange-rate systems	30	(8)
3.4 Conclusions	38	(3)
4 THE EMU AND SOCIAL EFFICIENCY	41	(20)
4.1 Reduced transaction costs	41	(5)
4.2 Exchange-rate fluctuations and effects on foreign trade, foreign direct investment, and interest rates	46	(8)
4.3 Effects on competition	54	(2)
4.4 Effects of lower inflation	56	(2)
4.5 Effects on seigniorage	58	(1)
4.6 Conclusions	59	(2)
5 MACROECONOMIC DISTURBANCES AND MONETARY POLICY	61	(26)
5.1 Monetary policy in an open economy	61	(4)
5.2 Exchange-rate policy and the effects of macroeconomic disturbances	65	(4)
5.3 What constitutes a suitable currency area?	69	(9)
5.4 Do floating exchange rates have destabilising effects?	78	(8)
5.5 Conclusions	86	(1)
6 INFLATION AND THE CREDIBILITY OF MONETARY POLICY	87	(26)
6.1 The basic inflation and credibility problem	88	(4)
6.2 Methods for dealing with the credibility problem	92	(7)
6.3 The monetary union, the credibility problem and inflation	99	(6)
6.4 Sweden's ability to handle the credibility problem independently and the position of the Riksbank	105	(6)
6.5 Conclusions	111	(2)
7 FISCAL POLICY AND THE EMU	113	(40)
7.1 The development of public finances	113	(8)
7.2 The Maastricht Treaty and fiscal policy	121	(5)
7.3 The arguments for fiscal policy rules	126	(11)
7.4 The scope for stabilisation policy	137	(9)
7.5 Does the monetary union involve further demands for fiscal policy integration?	146	(5)
7.6 Conclusions	151	(2)
8 THE LABOUR MARKET AND THE MONETARY UNION	153	(40)
8.1 Equilibrium unemployment, long-term unemployment, and economic policy	155	(2)
8.2 Macroeconomic disturbances and the need for labour-market adjustment	157	(4)
8.3 Nominal wage and price rigidities	161	(10)
8.4 Labour mobility	171	(2)
8.5 A strategy to combat unemployment in Sweden	173	(11)
8.6 A common European policy against unemployment?	184	(2)
8.7 Summary	186	(3)
Appendix: The effect of a change in relative labour costs on exports and imports - a rough estimate	189	(4)
9 THE EMU AS A POLITICAL PROJECT	193	(20)
9.1 Economic and political integration: the continental model	193	(1)
9.2 The EMU's role in European integration	194	(2)
9.3 The EU as a negotiating system	196	(2)
9.4 Franco-German co-operation	198	(2)
9.5 The formation of the EMU: the negotiations 1988-91	200	(5)
9.6 The EMU and differentiated integration	205	(3)
9.7 Political risks associated with the EMU	208	(2)
9.8 Summary and conclusions	210	(3)
10 THE EMU, DEMOCRACY, AND SWEDEN'S INTERNATIONAL INFLUENCE	213	(34)
10.1 Democratic control and accountability	213	(9)
10.2 The EMU and the moulding of political opinion	222	(5)
10.3 The EMU and Sweden's foreign-policy relations	227	(17)
10.4 Conclusions	244	(3)
11 TRANSITION PROBLEMS	247	(28)
11.1 The Maastricht Treaty's decision-making procedure and convergence criteria	248	(4)
11.2 The appropriateness of the convergence criteria	252	(4)
11.3 Economic conditions for a monetary union in 1999	256	(5)
11.4 Political conditions for a monetary union in 1999	261	(5)
11.5 An overall assessment of the conditions for a monetary union in 1999	266	(2)
11.6 Other transition problems	268	(5)
11.7 Conclusions	273	(2)
12 EXCHANGE-RATE ARRANGEMENTS BETWEEN PARTICIPANTS IN THE MONETARY UNION AND NON-PARTICIPANTS	275	(30)
12.1 The future ERM system	275	(5)
12.2 Advantages and disadvantages of a new ERM system	280	(15)
12.3 Alternative exchange-rate arrangements	295	(7)
12.4 Conclusions	302	(3)
13 SUMMARY AND CONCLUSIONS	305	(36)
13.1 Social efficiency aspects	306	(6)
13.2 Stabilisation-policy arguments	312	(11)
13.3 Political aspects	323	(9)
13.4 Conclusions about the EMU project as a whole	332	(2)
13.5 Conclusions about Sweden's participation in the monetary union	334	(2)
13.6 Critical factors	336	(5)
STATEMENT OF DISSENTING OPINION	341	(4)
NILS GOTTFRIES
REFERENCES	345	(18)
SUBJECT INDEX	363