EMU and transatlantic economic relations

When I wrote my book on EMU four years ago (Kenen 1995), very little had been written on the international dimensions of EMU There was a chapter in the Commission's path-breaking study (European Commission, 1990). There were papers by Alogoskoufis and Portes (1991, 1992), Cooper (1992), Goodhart (1992), Mundell (1993), and Williamson (1992), and there were a few working papers by economists at the Board of Governors of the Federal Reserve System (Edison and Kole, 1994; Johnson, 1994; and Leahy, 1994), but little else. The literature has grown hugely in the last two years, however, and it is hard to say something new about the whole subject or the narrower topic covered by this paper. As I cannot be very original, I will try at least to be controversial--to suggest that EMU will not dramatically alter the economic environment aor lead, as some believe, to large changes in existing institutions. This paper has three main parts. The first part deals with attitudes toward EMU in the United States. It is addressed to European readers who believe that American academics and officials are indifferent or hostile to EMU. The second part asks how EMU may affect the monetary and economic environment and how the new environment may affect transatlantic cooperation. The third part looks at institutional arrangements. It does not deal with the complex problems posed by EMU for the International Monetary Fund; it focuses instead on the membership and functioning of the G-7 and G-10, the two informal groups that provide the frame-work for cooperation among the major industrial countries.1 (This part of the paper has benefitted from the meeting of a workshop at Princeton University in April 1998, where academics and officials from Europe, the United States, and Japan discussed the implications of EMU for international economic cooperation.)