Will EMU Come as Intended and on Time
My task is to predict whether or when European monetary union (EMU) will be realised, and to explore Germany’s role in the drive to implement the Maastricht’s Treaty’s programme to create a single European currency. Positivism tells us that prediction is the other side of the coin labelled explanation — if you can do one, you can do the other. Yet social science’s record of predicting events is notoriously poor. Furthermore, as Eichengreen reminds us, ‘there are no precedents for Europe’s current course, in which countries with histories of monetary sovereignty and long-standing central banks establish a common central bank accountable to them jointly with control of their national monetary policies, including the power to issue a common currency’.1 Hence we have no cases, large or small, to draw upon as we anticipate the path of monetary union over the next few years. I shall nevertheless attempt to chart the likely developments in monetary union through the last year of the 1990s and into the next century. In doing so, I shall liberally apply the standard set of equivocating tools of social science, including ‘ceteris paribus’, ‘straight-line projection’ and the like.
KeywordsExchange Rate Monetary Policy Central Bank European Central Bank Monetary Union
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Notes and References
- 2.See Michael Emerson, Daniel Gros and Jean Pisani-Ferry, ‘One Market, One Money’, Report of the Commission of the European Communities, European Economy vol. 44 (October 1990), special issue;Google Scholar
- 2.Jeffrey A. Frankel, ‘Monetary Regime Choices for a Semi-Open Economy’, unpublished manuscript, University of California at Berkeley, 1992. See also Robert Morsink and Willem Molle, ‘Direct Investment and Monetary Integration’, European Economy 1991, special edition, pp. 36–55, for a negative assessmentGoogle Scholar
- 2.David O. Cushman, ‘Exchange-Rate Uncertainty and Foreign Direct Investment in the United States’, Weltwirtschafts Archiv vol. 123, no. 2 (1988), pp. 322–36 for a somewhat more positive assessment. As Eichengreen notes in a review of these arguments, the simple solution to transaction, trade and investment costs is to fix exchange rates among members, not to unify monetary policy under a common currency. See Eichengreen, ‘European Monetary Unification’, op. cit.CrossRefGoogle Scholar
- 4.See Derek W. Irwin, The Community of Europe: A History of European Integration Since 1945 (London: Longman, 1991), pp. 154–5.Google Scholar
- 6.Attributed to David Hale, chief economist of Zurich Kemper Investment, in Lionel Barber, ‘Point of No Return’, Financial Times, 30 December 1997, p. 9.Google Scholar