The European economy at the cross roads: Structural reforms, fiscal constraints, and the Lisbon Agenda

This paper studies the incentives to sustain and extend a monetary union under alternative assumptions about the extent of market reform within the union and accession countries. Lack of labour mobility, or wage/price flexibility, or fiscal reform, brings costs for both new entrants and in the exist...

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Bibliographic Details
Published in:Research in international business and finance 2005-06, Vol.19 (2), p.229-250
Main Authors: Hallett, Andrew Hughes, Jensen, Svend E. Hougaard, Richter, Christian
Format: Article
Language:English
Subjects:
EMU
Enlargement
Fiscal policy
Structural flexibility
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Summary:This paper studies the incentives to sustain and extend a monetary union under alternative assumptions about the extent of market reform within the union and accession countries. Lack of labour mobility, or wage/price flexibility, or fiscal reform, brings costs for both new entrants and in the existing union. Countries will therefore want a union where there has been sufficient reform, and also one where markets are more flexible than their own. But existing members will want the same properties of their partners. Fiscal restrictions may exaggerate this incentive mismatch and could therefore delay the necessary reforms. Similarly, too large costs up front may also delay those reforms.
ISSN:0275-5319
1878-3384
DOI:10.1016/j.ribaf.2004.12.003