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The single market and EMS instability

  • European Monetary System
  • Published:
Intereconomics

Abstract

The following analysis of the 1992/93 crisis of the European Monetary System finds that the unfolding of the single market dynamics will make European Monetary Union a difficult stage to achieve. Further monetary integration is only feasible if full employment and sustained growth are achieved in the EC. The Maastricht Treaty needs some add-ons if economic and monetary union is to succeed.

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References

  1. On this view see EC Commission: One Market, one Money, No. 44, Luxembourg 1990. For a broader analysis of the issues of the Maastricht Treaty and EC monetary union see P. J. J. Welfens (ed.): European Monetary Integration, 2nd enlarged edition, Berlin and New York 1993.

  2. IMF: World Economic Outlook, Washington DC 1993.

  3. Deutsche Bundesbank: Monatsberichte, November 1993.

  4. Cf. M. Goldstein, D. J. Mathieson and T. Lane: Determinants and Systemic Consequences of International Capital Flows, in: IMF (ed.): Determinants and Systemic Consequences of International Capital Flows, p. 5.

  5. On the increasing role of portfolio capital flows as a source of equity capital cf. Bank for International Settlements: Annual Report, Basle 1992; on related issues of foreign direct investment flows in Europe cf. M. Klein, P. J. J. Welfens (eds.): Multinationals in the New Europe and Global Trade, Berlin and New York 1992; and G. N. Yannopoulos: Multinational Corporations and the Single European Market, University of Reading Discussion Paper No. 45, Reading 1992.

  6. F. Giavazzi, M. Pagano: The Advantage of Tying One's Hands: EMS Discipline and Central Bank Credibility, in: European Economic Review, Vol. 32, 1988, pp. 1055–1082; cf. also R. Barro, D. Gordon: Rules, Discretion and Reputation in a Model of Monetary Policy, in: Journal of Monetary Economics, July 1983, pp. 101–121.

  7. Cf. F. Kydland, E. Prescott: Rules Rather than Discretion: The Inconsistency of Optimal Plans, in: Journal of Political Economy, 1977.

  8. Cf. on this T. Lane: Market Discipline, IMF Working Paper, WP/92/42, Washington DC 1993, forthcoming in IMF Staff Papers.

  9. Cf. IMF: German Unification, Economic Issues, Occasional Paper No. 75, Washington DC 1990; P. J. J. Welfens (ed.): Economic Aspects of German Unification, Heidelberg and New York, 2nd edition, 1994.

  10. Cf. P. J. J. Welfens: Market-oriented Systemic Transformations in Eastern Europe, Berlin, New York 1992; P. J. J. Welfens (ed.): The Single Market and the Eastern Enlargement of the EC, Berlin, New York 1994.

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Authors and Affiliations

  1. University of Muenster, Germany

    Paul J. J. Welfens

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  1. Paul J. J. Welfens
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Welfens, P.J.J. The single market and EMS instability. Intereconomics 29, 59–67 (1994). https://doi.org/10.1007/BF02928144

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  • DOI: https://doi.org/10.1007/BF02928144

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