Peter Birch Sørensen (ed.) Monetary Union in Europe Historical Perspectives and Prospects for the Future Essays in honour of Niels Thygesen DJØF Publishing Copenhagen
This book contains the proceedings of a conference held in Copenhagen on th th December 10, 2004 on the occasion of Niels Thygesen's 70 birthday. The book provides an overview of the historical and theoretical background for monetary union in Europe, an extensive assessment of the experience with the first six years of the Eurosystem, and a discussion of the»unfinished business«of the EMU, including the fiscal framework and the framework needed to secure financial stability. The book ends with a discussion of the implications of Europe's experience with monetary unification for other regions. The authors of this book are colleagues and friends of Niels Thygesen. They have all made important contributions to European or international monetary cooperation, either through the insights gained via their academic research, or as key policy makers. ISBN 978-87-574-9111-9
Peter Birch Sørensen (ed.) Monetary Union in Europe Historical perspectives and prospects for the future Essays in honour of Niels Thygesen DJØF Publishing Copenhagen 2004
Monetary Union in Europe Historical perspectives and prospects for the future Essays in honour of Niels Thygensen First edition 2004 2004 by Jurist- og Økonomforbundets Forlag DJØF Publishing Copenhagen DJØF Publishing is a company of the Association of Danish Lawyers and Economists All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher. Photo: Rigmor Mydtskov Cover Design: Morten Højmark Print: Narayana Press, Gylling Binding: Jysk Bogbind, Holstebro Printed in Denmark 2004 ISBN 87-574-1117-4 E-bog 978-87-574-9111-9 DJØF Publishing 17 Lyngbyvej P.O.B. 2702 DK-2100 Copenhagen Ø Denmark Telephone: +45 3913 5500 Telefax: +45 3913 5555 E-mail: fl@djoef.dk Internet: www.djoef-forlag.dk 4
Table of Contents Table of Contents Acknowledgements... 7 List of contributors... 9 Introduction. Niels Thygesen and European Monetary Integration.. 11 Peter Birch Sørensen Part I. Limiting Exchange Rate Swings The Precarious Road to EMU Chapter 1. Limiting Exchange Rate Swings in a World of Imperfect Knowledge... 35 Roman Frydman and Michael Goldberg Chapter 2. The EMS 1979-1993: A Lesson of Limits to Policy Coordination... 51 Gunter D. Baer Chapter 3. The Exchange Rate Mechanism ERM as a Prelude to EMU 65 Charles Wyplosz Part II. How has EMU Worked? Chapter 4. Was It Worth It?... 69 Guido Tabellini Chapter 5. Endogeneities of Optimum Currency Areas... 69 Paul De Grauwe and Francesco Paolo Mongelli 5
Table of Contents Chapter 6. The ECB's Monetary Policy Strategy Revisited... 69 Alexandre Lamfalussy Chapter 7. Parallel Monies, Parallel Debt: Lessons from the EMU and Options for the New EU Members... 69 Giorgio Basevi, Lorenzo Pecchi and Gustavo Piga Part III. The Fiscal Framework of the EMU Chapter 8. What Went Wrong with the Stability and Growth Pact?... 69 Lorenzo Bini Smaghi Chapter 9. The Fiscal Framework Under Stress... 69 Daniel Gros Chapter 10. How Should We Cope With the Crisis of the EMU Fiscal Framework?... 69 Edmond Alphandéry Chapter 11. EMU and Tax Policy... 69 Mario Monti Part IV. The Framework for Financial Stability Chapter 12. European Financial Integration: Nuts and Bolts... 69 Luigi Spaventa Chapter 13. A Second Central Bank Instrument?... 69 Charles A.E. Goodhart and Boris Hofmann Part V. The EMU Experience Perspectives for Other Regions Chapter 14. East Asian Monetary Arrangements: A European Perspective... 69 Tommaso Padoa-Schioppa 6
Acknowledgements The present book, based on contributions to a conference held in honour of Niels Thygesen at the University of Copenhagen on December 10, 2004, is published with financial support from the Institute of Economics, University of Copenhagen, Danmarks Nationalbank, and the Danish Economic Association (Nationaløkonomisk Forening). The support from these institutions is gratefully acknowledged. The author, the editor and the publisher are indebted to Blackwell Publishing Ltd. for granting permission to use, in chapter 16, the article by Tommaso Padoa-Schioppa, previously published in International Finance, July 2004. 7
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