Towards a Strategic View on EMU: A Critical Survey

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Abstract
This paper contributes to the ongoing debate over European Monetary Union (EMU), reviewing the economics literature on the merits of a single currency (‘optimum currency area’) and on the requirements for astable currency (‘credibility’). To understand Europe's drive for EMU and the transition strategy adopted at Maastricht both issues must be analysed together. The controversial convergence criteria in the Maastricht Treaty, in particular, primarily address valid concerns about the (price) stability performance of a future single currency by determining the timing and membership of EMU. In general, we propose to interpret the Maastricht design as a mechanism that must reconcile conflicting interests, solve credibility problems over time and extract information about candidate countries’ ‘stability culture’ in the run-up to monetary union.

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