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The Economic Case for Monetary Union in the European Union
Author(s) -
Buiter Willem H.
Publication year - 1997
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.5.4s.2
Subject(s) - economics , seigniorage , exchange rate flexibility , monetary hegemony , political union , monetary economics , fiscal union , international economics , redistribution (election) , blessing , european union , exchange rate , macroeconomics , monetary policy , exchange rate regime , fiscal policy , politics , european integration , archaeology , law , political science , history
Differential requirements for seigniorage provide a weak case for retaining monetary independence. As regards adjustment to asymmetric shocks, nominal exchange rate flexibility is at best a limited blessing and at worst a limited curse. Absence of significant fiscal redistribution mechanisms among EU members is not an obstacle to monetary union. Neither is limited international labour mobility. Convergence of real economic performance is irrelevant for monetary union. A common currency is the logical implication of unrestricted capital mobility. The Maastricht criteria need not hinder monetary union provided the political will exists to adopt a flexible interpretation of the fiscal criteria.