Is There a Conflict Between EC Enlargement and European Monetary Unification?

Tamim Bayoumi and Barry Eichengreen

No 646, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Recent proposals for enlarging the European Community to include the EFTA countries raise the question of whether the new members should participate in a European Monetary Union. In part, the issue hinges on the incidence of aggregate supply and demand disturbances. We use data on prices and output and a VAR decomposition to analyse this issue empirically, grouping economies according to the magnitude of the disturbances, their cross-country correlation, and speeds of response. We distinguish an EC `core' (Germany and its immediate neighbours) and an EC periphery (UK and the Southern European members of the Community). Austria, Sweden and Switzerland display more similarity to the EC core than do Finland, Iceland and Norway. This suggests that the case for EMU participation is stronger for Austria, Sweden and Switzerland than for the other EFTA countries.

Keywords: EC Enlargement; EFTA; EMU (search for similar items in EconPapers)
JEL-codes: F3 (search for similar items in EconPapers)
Date: 1992-05
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Citations: View citations in EconPapers (21)

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Working Paper: Is There a Conflict Between EC Enlargement and European Monetary Unification? (1992)
Working Paper: Is There a Conflict Between EC Enlargement and European Monetary Unification? (1992)
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