Working Paper: CEPR ID: DP792
Authors: Alberto Alesina; Vittorio Grilli
Abstract: This paper addresses two questions: (1) Is a twelve-country monetary union in Europe feasible? (2) Can monetary union be achieved in stages, i.e. with an initial group of countries going first, and later admitting the others? After examining several politico-economic arguments concerning problems of feasibility of the union, we conclude with a fair amount of scepticism concerning the multi-speed idea. We show that the final result of the monetary integration process depends on `how many speeds' Europe proceeds with. Our discussion of feasibility sheds some light on the political economy of the recent (Fall of 1992) turmoil in the monetary system of Europe.
Keywords: European Monetary Union; Multispeed; Political Economy; European Monetary System
JEL Codes: F15; F33; F36
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| One-speed twelve-country monetary union is feasible (F36) | All countries are better off with the union than without it (F55) |
| Preferences of existing members (D71) | Potential for expansion of the union (F36) |
| Political decision-making processes (D72) | Economic integration outcomes (F15) |
| Shocks affecting countries and preferences for monetary policy (F41) | Success of the union (J51) |
| Differences in inflation preferences and output stabilization needs (E31) | Impacts of policy decisions on economic outcomes (D78) |