by Andrew Hughes Hallett, Svend E. Hougaard Jensen and Christian Richter,Vienna, 2004
This paper studies the incentives to join or enlarge a monetary union under alternative assumptions about the extent of market reform within the union and in candidate countries. Lack of labour mobility, wage/price flexibility or fiscal reform brings costs for both new entrants and in the existing union. Countries will only want to join a union where there has been sufficient reform, and where markets are more flexible than their own. But existing members will want the same properties of their new partners as well. Fiscal restrictions, or a lack of fiscal flexibility, will exaggerate this incentive mismatch and may delay the necessary reforms.
A theoretical framework: An overview
A quantitative assessment: an “orders of magnitude” calculation
An extended empirical analysis: A simulation approach
EMU and structural reform
Is there a link between fiscal constraints and structural reform?
Appendix: Details of the Oxford Economic Forecasting (OEF) model
Keywords: EMU, Enlargement, Structural Flexibility, Fiscal Policy
JEL Codes: F2, F15, F33, F42
ISBN No.: 3-902109-22-X
Authors: Andrew Hughes Hallett, Svend E. Hougaard Jensen and Christian Richter