ECONOMICS OF MONETARY UNION (P) Book

	List of Figures
	List of Tables
	Introduction
I	Costs and Benefits of Monetary Union	3
1	The Costs of a Common Currency	5
1	Shifts in Demand (Mundell)	6
2	Different Preferences of Countries about Inflation and Unemployment	13
3	Differences in Labour Market Institutions	18
4	Growth Rates are Different	25
5	Different Fiscal Systems and the Seigniorage Problem	26
2	The Theory of Optimum Currency Areas: A Critique	30
1	How Relevant are the Differences between Countries?	30
2	Nominal and Real Depreciations of the Currency	37
3	Devaluation, Time Consistency, and Credibility	45
4	The Cost of Monetary Union and the Openness of Countries	55
3	The Benefits of a Common Currency	61
1	Direct Gains from the Elimination of Transaction Costs	61
2	Indirect Gains from Eliminating Transaction Costs	63
3	Welfare Gains from Less Uncertainty	64
4	Exchange Rate Uncertainty and the Price Mechanism	68
5	Exchange Rate Uncertainty and Economic Growth	71
6	Benefits of a Monetary Union and the Openness of Countries	77
4	Costs and Benefits Compared	82
1	Costs and Benefits Compared	82
2	Monetary Union, Price and Wage Rigidities, and Labour Mobility	85
3	A Case-Study	86
II	Monetary Integration	93
5	Incomplete Monetary Unions: The European Monetary System	95
2	The Credibility Problem	95
3	Credibility Issues in the EMS	103
4	The Liquidity Problem in Pegged Exchange Rate System	111
5	Symmetric and Asymmetric Systems Compared	116
6	The Choice of a Leader in the EMS	121
7	Disinflation in the EMS during the 1980s	123
6	The Transition to a Monetary Union	130
2	The Delors Report: A Three-Stage Approach	130
3	Gradualism Versus Shock Therapy in Monetary Unification	131
4	The Incentives of the Low-Inflation Country	141
5	The Parallel Currency Approach to Monetary Unification	143
7	A European Central Bank	152
2	Irrevocably Fixed Exchange Rates or a Common Currency	152
3	Institutional Implications of an 'Irrevocably Fixed' Exchange Rate System	155
4	Institutional Implications of a Common Currency	158
5	The Design of the European Central Bank	159
8	Fiscal Policies in Monetary Unions	163
2	Fiscal Policies and the Theory of Optimum Currency Areas	163
3	Sustainability of Government Budget Deficits	166
4	The Argument for Rules on Government Budget Deficits	170
5	Fiscal Discipline in Monetary Unions	173
	References	180
	Index	189