European Monetary Union and Capital Markets

by Choi; Wrase

• ISBN13: 9780762308309
• ISBN10: 0762308303
• Format: Hardcover
• Copyright: 2001-12-13
• Publisher: Elsevier Science & Technology

Summary

To form a more perfect economic union and to establish a single market financially, economically and politically, 11 European countries founded a common currency and a European Central Bank, and created a new monetary unit, the euro, on 1st January, 1999. On that date, the old national currencies officially became subunits of the euro, much as the nickel and quarter are subunits of the dollar. Fifteen countries started down the road to monetary union in 1992, when they signed the Treaty on European Union, commonly known as the Maastricht Treaty, which outlined a basic structure for the alliance. However, of those 15 countries, only 11 initially joined the European Monetary Union (EMU): three countries opted out, and another did not meet the economic criteria established for membership in the union. The EMU countries decided that the benefits of having one common currency instead of 11 different ones would outweigh the costs, especially given the amount of travel, trade and financial flow that takes place between these countries. This volume considers effects on capital and goods markets of monetary union in general and European Monetary Union (EMU) in particular. The effects of monetary union addressed here broadly fall into three categories -adjustments in goods and labor markets, adjustments in money and capital markets, and institutional adjustments when a group of countries adopt a common currency (and a common monetary policy), but retain quasi- independent fiscal (and other economic) policies. The relation between monetary union and capital market integration is also highlighted.

Table of Contents

List of Contributors	ix
About the Editors	xi
I: AN OVERVIEW OF EUROPEAN MONETARY UNION AND CAPITAL MARKETS
Monetary Union and Market Integration: Capital and Goods Market Issues Pertaining to the Launching of the Euro	3	(10)
J. Jay Choi
Jeffrey M. Wrase
II: APPROACHING MONETARY UNION IN EUROPE: HISTORY AND FOUNDATIONS
Historical Overview of the Transition to Monetary Union in Europe	13	(8)
Kerk Phillips
Jeffrey M. Wrase
A Retrospective Structural Break Analysis of the French German Interest Rate Differential in the Run-Up to EMU	21	(30)
Jerome Henry
Peter McAdam
Volatility and Misalignments of EMS and Other Currencies During 1974--1998	51	(48)
Michael G. Papaioannou
III: EUROPEAN MONETARY UNION AND CAPITAL MARKETS
Impact of the Euro on Primary Equity Markets	99	(38)
E. K. Gatzonas
Country and Industry Effects in Euroland's Equity Markets	137	(20)
Ivo J. M. Arnold
Intra-Day Transmission of International Stock Prices	157	(22)
Cheol S. Eun
Jin-Gil Jeong
IV: MONETARY AND FISCAL POLICY ISSUES IN THE MONETARY UNION
Organization and Policy Procedures of the European System of Central Banks	179	(16)
Jeffrey M. Wrase
Monetary and Fiscal Policy Rules in the European Economic and Monetary Union: A Simulation Analysis	195	(24)
Gottfried Haber
Reinhard Neck
Warwick J. McKibbin
Is There Potential for Monetary Union Outside Europe?	219	(14)
Vince Hooper
V: TRADE AND MARKET POWER
Monetary Union Expansion: The Role of Market Power in Trade	233	(14)
Mark M. Spiegel
The European Monetary Union vs. USA, Cooperation and Competition: An Examination of Welfare Benefits	247	(20)
Lall B. Ramrattan
Cathyann D. Tully
Michael Szenberg
The Euro Exchange Rate and Consumer Prices	267
Sinimaaria Ranki