The Assessment: EMU, Four Years On.

Journal article

This paper reviews the functioning of the Economic and Monetary Union over the first 4 years of its existence. Monetary policy is viewed as having been of the "inflation-targeting" type, but with a tendency towards delay and conservatism in adjustment, which may also reflect over-optimistic output growth forecasts. The resulting pressure on the Stability and Growth Pact (SGP) illustrates the weakness in the "consensus view" of the harmonious interaction of monetary, fiscal, and supply-side policies, which requires policy in all three areas to be "correct". In discussing reform of the SGP, a looser but still constraining form of fiscal agreement is advocated. The supply-side and balance-of-payments issues involved in inter-country adjustment also interact importantly with the SGP and are identified as key areas of difficulty in a still "immature" monetary union, with separate labour-market structures. Here the mechanisms for coordination are more or less absent.

Authors: Allsopp, C; Artis, M

• Journal: Oxford Review of Economic Policy
• Volume: 19
• Publication date: 2003-01-01
• ISSN: 0266-903X
• Language: English