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

Tamim Bayoumi and Barry Eichengreen

No 3950, NBER Working Papers from National Bureau of Economic Research, Inc

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 analyze this issue empirically, grouping economies according to the magnitude of the disturbances, their cross-country correlation, and speeds of response. This leads us to distinguish an EC "core" (made up of Germany and its immediate neighbors) and an EC periphery (made up of the UK and the Southern European members of the Community). Austria, Sweden and Switzerland behave more similarly to the EC core than do Norway, Finland and Iceland. This suggests that the case for EMU participation is stronger for Austria, Sweden and Switzerland than for the other EFTA countries.

Date: 1992-01
Note: ITI IFM
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Citations: View citations in EconPapers (26)

Published as Greek Economic Review, 1993

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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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