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International Implications of European Economic and Monetary Union

Author

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  • Norbert Funke
  • Mike Kennedy

Abstract

For a long time European Economic and Monetary Union was mainly considered an internal European issue and external consequences were largely ignored. In contrast to most previous analyses, this paper looks at a number of international implications of monetary union. It is argued that several factors could contribute to the euro becoming an international currency in the future and a competitor to the US dollar in this respect. The degree of uncertainty attached to this outcome, however, remains considerable and in any event the emergence of the euro as a major international currency is likely to take some time. Given the expected size of the euro-zone and the likelihood of the euro becoming an international currency, fiscal and monetary policies in the area are likely to have a significant impact on the macroeconomic environment in the rest of the world. An important issue is how will monetary union affect major bilateral exchange rate developments and their volatility. A number of ... Pendant longtemps, l’Union économique et monétaire européenne était surtout considérée comme une affaire interne à l’Europe, et les conséquences externes étaient largement ignorées. Contrairement à la plupart des analyses précédentes, cet article considère un certain nombre d’implications internationales de l’union monétaire. Il soutient que plusieurs facteurs pourraient contribuer à transformer l’euro en une monnaie internationale dans l’avenir et devenir ainsi le concurrent du dollar américain. Cependant, le degré d’incertitude entourant ce résultat demeure considérable et, en tout état de cause, l’émergence de l’euro en tant que monnaie internationale devrait prendre quelque temps. Étant donné la dimension prévue de la zone euro et la probabilité que l’euro devienne une monnaie internationale, les politiques budgétaires et monétaires dans ce domaine devraient influer de manière significative sur l’environnement macroéconomique du reste du monde. La manière dont l’union monétaire ...

Suggested Citation

  • Norbert Funke & Mike Kennedy, 1997. "International Implications of European Economic and Monetary Union," OECD Economics Department Working Papers 174, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:174-en
    DOI: 10.1787/557406211626
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    Cited by:

    1. Maclennan, Duncan & Muellbauer, John & Stephens, Mark, 1998. "Asymmetries in Housing and Financial Market Institutions and EMU," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 14(3), pages 54-80, Autumn.
    2. Chantal Dupasquier & Jocelyn Jacob, 1997. "European economic and monetary union: Background and implications," Bank of Canada Review, Bank of Canada, vol. 1997(Autumn), pages 3-28.
    3. Cooper, Richard N., 1999. "Key Currencies After the Euro," Scholarly Articles 15754030, Harvard University Department of Economics.
    4. Agnès Bénassy-Quéré & Benoît Mojon & Armand-Denis Schor, 1998. "The International Role of the Euro," Working Papers 1998-03, CEPII research center.
    5. Carsten Detken & Philipp Hartmann, 2000. "The Euro and International Capital Markets," International Finance, Wiley Blackwell, vol. 3(1), pages 53-94, April.
    6. Jacques Le Cacheux, 1998. "La diffusion internationale de l'euro," Revue de l'OFCE, Programme National Persée, vol. 65(1), pages 227-241.
    7. Martine Durand, 1999. "Challenges for International Economic Policy Coordination in EMU: Institutional Setting, Financial Market Reactions and the Importance of Systemic Risk," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 26(3), pages 281-286, September.
    8. Bas Aarle & Michael Boss & Jaroslava Hlouskova, 2000. "Forecasting the Euro exchange rate using vector error correction models," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 136(2), pages 232-258, June.
    9. Ilan Goldfajn & Roberto Rigobon, 2000. "Hard currency and financial development," Textos para discussão 438, Department of Economics PUC-Rio (Brazil).
    10. Aykut Kibritcioglu, 2003. "EMU, EURO and EU-Membership: An Evaluation from the Turkish Macroeconomic Perspective," Macroeconomics 0301004, University Library of Munich, Germany, revised 16 Jan 2003.
    11. Lefebvre, Dominique, 1997. "Euro Internationalization," MPRA Paper 89353, University Library of Munich, Germany.
    12. Françoise Le Quéré, 1999. "Les sources de l'internationalisation de l'euro," Revue d'Économie Financière, Programme National Persée, vol. 52(2), pages 31-54.
    13. Langhammer, Rolf J., 1998. "European integration deepening and widening: Implications for Asia," Kiel Working Papers 892, Kiel Institute for the World Economy (IfW Kiel).
    14. Hartmann, Philipp, 1998. "The Currency Denomination of World Trade after European Monetary Union," Journal of the Japanese and International Economies, Elsevier, vol. 12(4), pages 424-454, December.

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