Leader of the pack? German monetary dominance in Europe prior to EMU
J Reade () and
Economic Modelling, 2011, vol. 28, issue 1-2, pages 239-250
In this paper, the monetary policy independence of European nations in the years before European Economic and Monetary Union (EMU) is investigated using cointegration techniques. Daily data is used to assess pairwise relationships between individual EMU nations and 'lead' nation Germany, to assess the hypothesis that Germany was the dominant European nation prior to EMU. By and large our econometric investigations support this hypothesis, and lead us to conclude that the only European nation to lose monetary policy independence in the light of monetary union was Germany. Our results have important policy implications. Given that the loss of monetary policy independence is generally viewed as the main cost of monetary unification, our findings suggest a reconsideration of the costs and benefits of monetary integration. A country can only lose what it has, and in Europe the countries that joined EMU -- spare Germany -- apparently did not have much to lose, at least not in terms of monetary independence. Instead, they actually gained monetary policy influence by getting a seat in the ECB's governing council which is responsible for setting interest policy in the euro area.
Keywords: Monetary; policy; independence; European; monetary; integration; Cointegrated; VAR; method (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (7) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Journal Article: Leader of the pack? German monetary dominance in Europe prior to EMU (2011)
Working Paper: Leader of the Pack? German Monetary Dominance in Europe Prior to EMU (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:eee:ecmode:v:28:y:2011:i:1-2:p:239-250
Access Statistics for this article
Economic Modelling is currently edited by S. Hall and P. Pauly
More articles in Economic Modelling from Elsevier
Series data maintained by Zhang, Lei ().