Systemic Conflict and Regional Monetary Integration: The Case of Europe

Existing explanations of European monetary integration, emphasizing economic interdependence, issue linkage, institutions, and domestic politics, take a predominantly regional approach. In the international monetary thesis developed here, I argue that U.S. policy disturbances, transmitted through th...

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Bibliographic Details
Published in:International organization 1998, Vol.52 (3), p.537-573
Main Author: Henning, C. Randall
Format: Article
Language:English
Subjects:
Conflict
Currency
Economic and Monetary Union
Economic integration
Economic interdependence
Economic policy
Economic systems
Europe
European integration
European Monetary System
Government policy
Integration
International aspects
International economic cooperation
International relations
Macroeconomic policy
Macroeconomics
Monetary Policy
Monetary relations
Monetary unions
Political integration
Regional analysis
Regionalism
Treaties
U.S.A
United States
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Summary:Existing explanations of European monetary integration, emphasizing economic interdependence, issue linkage, institutions, and domestic politics, take a predominantly regional approach. In the international monetary thesis developed here, I argue that U.S. policy disturbances, transmitted through the international monetary system, created compelling incentives for European states to cooperate on exchange-rate and monetary policy. I develop a general theory of macroeconomic power, based on open economy macroeconomics, and show how the exercise of such influence can drive regional monetary integration. This article then tests the international thesis with reference to monetary integration within the European Union by examining four periods in which the United States acted to stabilize the international monetary system and seven episodes in which it disrupted the system. European governments and central banks reduced regional monetary cooperation when the United States supported system stability and strengthened it after each episode of disruption. The evidence thus strongly supports the inference that the link is causal.
ISSN:0020-8183
1531-5088
DOI:10.1162/002081898550653