Working Paper: CEPR ID: DP722
Authors: Charles R. Bean
Abstract: This paper assesses the costs and benefits of monetary union in Europe. It is argued that neither the costs nor the benefits are in principle likely to be as great as critics and proponents respectively have suggested. Fiscal issues are, it is argued, likely to be far more significant. Fiscal federalism is by no means a necessary corollary of monetary union and the `Maastricht rules' on public debt and deficits will place harmful constraints on national fiscal policies. Finally the Community's Structural Funds are unlikely to be the most efficient way of redistributing resources between member states.
Keywords: European Monetary Union; Fiscal Federalism
JEL Codes: E58; F33; H77
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Loss of exchange rate as a tool for macroeconomic management (F31) | Increased economic instability (F69) |
| Elimination of exchange rate volatility (F31) | Economic efficiency (D61) |
| Introduction of a common currency (F36) | Lower inflation rates (E31) |
| Maastricht rules on public debt and deficits (H68) | Contractionary fiscal bias in high-debt countries (E62) |