Regional Currency Areas in Financial Globalization
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Regional Currency Areas in Financial Globalization

Edited by Patrick Artus, André Cartapanis and Florence Legros

This book is an up-to-date, authoritative and comprehensive analysis of the key issues and challenges facing regional currency area projects in the context of financial globalization. The authors focus on several central issues that emerged during the experiences of the 1990s and 2000s: exchange rate regimes and optimal currency area theory; exchange rate regimes in emerging countries, international capital markets and regional currency areas; EMU and the euro; exchange rate regimes in Central and Eastern Europe, Asia and Latin America; dollarization and the coordination of macroeconomic policies in the presence of regional currency areas.
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Chapter 12: Comparing Monetary and Fiscal Policies in Europe and in the United States: A Strategic Analysis

Pierre Faure


12. Comparing monetary and fiscal policies in Europe and in the United States: a strategic analysis Pierre Faure INTRODUCTION According to some economists (Emerson et al., 1990), monetary unification in Europe should facilitate dialogue and cooperation with the rest of the world. Some others think on the contrary that the launch of the euro is likely to complicate international macroeconomic policy coordination (Goodhart, 1993; Kenen, 1993; Begg et al., 1997). The optimistic point of view in Emerson et al. (1990) mainly rests on the idea that the European currency union is likely to increase the costs of non-cooperative behaviour for the United States, because of the removal of the asymmetry linked to the small size and high degree of openness of European economies. The other countries should be more aware of those costs and therefore take into account the spillovers of their policies. We think however that the analysis in the Emerson report oversimplifies many things, especially because it considers the European Monetary Union (EMU) as representing a single actor and, in this way, supposes the appearance of a G4 at the international level. It is true that the finance ministers agreed in 1998 upon a three-handed representation mode in the G8 meetings. But such a simplification does not make sense from a fiscal point of view (see in particular Goodhart, 1993). No treaty ensures the coordination of national fiscal policies or their consistency with the monetary strategy of the European Central Bank (ECB). In view of...

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