Some Political Economy Aspects of EMU
نویسندگان
چکیده
European Monetary Union (EMU) is here at last, but according to economists’ traditional perspective on economic policy making, it should not be. Given the nontrivial nature of this occurrence, it offers an important warning signal that policy economists need to reexamine our assumptions about the forces generating economic policy decisions. Economists, of course, have strong preferences for analysis based on assumptions of rationality and efficiency, and with good reason. When we turn from the analysis of market behavior to that of policy making, however, the simple application of these assumptions does not stand up as well. The economists’ traditional approach in this area has been to attempt to figure out what policy will maximize aggregate economic efficiency, and then assume that this is what the government will adopt. This benign dictator or optimal social planner approach is not totally devoid of predictive power. Similar predictions can be derived from idealized models of democratic processes, and are roughly approximated by the fully informed median voter model of public choice analysis. Most economic policy choices cannot be explained in this manner, however, and the creation of EMU is no exception. The choice of international currency policy has been a major area of monetary research. The theory of optimum currency area (OCA), pioneered by Robert Mundell, focuses precisely on the factors that influence the economic costs and benefits of adopting fixed versus flexible exchange rates. Over time, the number of criteria found to be relevant for this cost–benefit analysis has
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