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European monetary unification seems to be one of the most important events in international monetary affairs since the breakdown of Bretton Woods. It pos es a major challenge to central banks, governments, and labour unions. It opens up new fields of economic research that are both intriguing and fascinating. European Monetary Union amounts to a switch of regime. Surely the Mundell Fleming model of the open economy does no longer apply to Germany or France. The effects of shocks and policies on output and prices should have changed dramatically in size. Some of them should even work in the opposite direction now. The present book is part of a larger research project on monetary union, see Carlberg (1999, 2000, 2001, 2002, 2003). Some parts of this project were presented at the World Congress of the International Economic Association in Lisbon. Other parts were presented at the Macro Study Group of the German Economic Association, at the Annual Meeting of the Austrian Economic Association in Klagenfurt, at the Pass au Workshop on International Economics, at the Halle Workshop on Monetary Economics, and at the Research Seminar on Macroeconomics in Freiburg. Moreover, book reviews were published in the Economic Journal, Kyklos, the Journal of Economics, and the Journal of Economics and Statistics.
List of contents
1. Subject and Approach.- 2. The Monetary Union of Two Countries: Basic Models.- 3. The Monetary Union of Two Countries: Intermediate Models.- One. The Monetary Union of Two Countries: Basic Models.- 1. Monetary Policy in the Union.- 2. Fiscal Competition between Germany and France.- 3. Fiscal Cooperation between Germany and France.- 4. Competition between the Union Central Bank, the German Government, and the French Government.- 5. Cooperation between the Union Central Bank, the German Government, and the French Government.- 6. Independent Central Bank, Fiscal Cooperation between Germany and France.- 7. A Synopsis of the Basic Models.- Two. The Monetary Union of Two Countries: Intermediate Models.- 1. Fiscal Competition: A General Model.- 2. The Union Countries Differ in Size.- 3. The Union Countries Differ in Behaviour.- 4. Simultaneous and Independent Decisions.- 5. Gradualist Policies.- 6. Alternative Targets of the Union Central Bank.- 7. The German Government Targets Overemployment.- 8. No Spillovers of Fiscal Policy.- 9. Positive Spillovers of Fiscal Policy.- Three. The Monetary Union of Two Countries: Advanced Models.- 1. Cold-Turkey Policies: Sequential Decisions.- 2. Cold-Turkey Policies: Simultaneous Decisions.- 3. Gradualist Policies: Sequential Decisions.- 4. Gradualist Policies: Simultaneous Decisions.- 5. Monetary, Fiscal and Wage Competition.- Four. The Monetary Union of n Countries.- 1. The Monetary Union of Three Countries.- 2. The Monetary Union of Four Countries.- Five. Rational Policy Expectations.- 1. Rational Policy Expectations in Germany and France.- 2. Adaptive Policy Expectations in Germany and France.- 3. Adaptive Policy Expectations in Germany, Rational Policy Expectations in France.- Conclusion.- Result.- 1. Monetary Policy in the Union.- 2. Fiscal Competition between Germany and France.- 3. Fiscal Cooperation between Germany and France.- 4. Competition between the Union Central Bank, the German Government, and the French Government.- 5. Cooperation between the Union Central Bank, the German Government, and the French Government.- 6. Independent Central Bank, Fiscal Cooperation between Germany and France.- Symbols.- A Brief Survey of the Literature.- The Current Research Project.- References.
Summary
European monetary unification seems to be one of the most important events in international monetary affairs since the breakdown of Bretton Woods. It pos es a major challenge to central banks, governments, and labour unions. It opens up new fields of economic research that are both intriguing and fascinating. European Monetary Union amounts to a switch of regime. Surely the Mundell Fleming model of the open economy does no longer apply to Germany or France. The effects of shocks and policies on output and prices should have changed dramatically in size. Some of them should even work in the opposite direction now. The present book is part of a larger research project on monetary union, see Carlberg (1999, 2000, 2001, 2002, 2003). Some parts of this project were presented at the World Congress of the International Economic Association in Lisbon. Other parts were presented at the Macro Study Group of the German Economic Association, at the Annual Meeting of the Austrian Economic Association in Klagenfurt, at the Pass au Workshop on International Economics, at the Halle Workshop on Monetary Economics, and at the Research Seminar on Macroeconomics in Freiburg. Moreover, book reviews were published in the Economic Journal, Kyklos, the Journal of Economics, and the Journal of Economics and Statistics.
