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Europe and the Maastricht Challenge, Research Paper 9616

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Europe and the Maastricht Challenge, Research Paper 9616

DATE: June 1996

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ABSTRACT: The uncertainty caused by the exchange rate crises of 1992-93 led to two questions: Is monetary union still feasible? What strategies are best for achieving convergence according to the Maastricht criteria? This article addresses these questions by examining the progress made by the five major European Union countries in satisfying the Maastricht criteria and the two crucial impediments facing these countries—disparities in real exchange rate convergence and fiscal imbalances—and alternative strategies to deal with these impediments. Overall, our analysis suggests that the prospects for monetary union are less gloomy than many analysts believe. We show that wide bands have been useful in limiting competitive disparities. We also argue for more general fiscal criteria set forth in the Maastricht treaty. Under these more general criteria, countries that reversed the path of debt accumulation and achieved a sustainable deficit would be admitted to the monetary union. Finally, under a multispeed transition, a small group of countries will form the initial core of the monetary union, and other countries will join over time.

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Aglietta, Michel, 1938- and Uctum, Merih. "Europe and the Maastricht Challenge, Research Paper 9616," Research Papers (Federal Reserve Bank of New York) (June 1996). https://fraser.stlouisfed.org/title/6570/item/615531, accessed on March 29, 2023.

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THEMES: CLASSIFICATION:
  • lcc: HG136 .R45 no.9616
IDENTIFIERS:
  • oclc: 35740765
  • fip:fednrp:9616:
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