Term Paper

European Monetary Unification

History and Prospects

The Maastricht Council of December 1991 was both the end of a long process of study, discussion and negotiation and the beginning of a complex evolution of the European Community's institutions. Economic analysis has informed and learned from Europe's monetary unification, from the Werner Report to the Delors Committee's proposals for EMU. A joint CEPR conference with the Banco Pastor on `The Monetary Future of Europe', held in La Coruña on 11/12 December, examined the intellectual history that led to Maastricht and the prospects for monetary unification after the September crises on Europe's currency markets. The conference was organized by Guillermo de la Dehesa, Vice-Chairman of CEPR and Conseyo Delegado at the Banco Pastor, Alberto Giovannini, Jerome A Chazen Professor of International Business at Columbia University and member of the Italian Treasury Ministry's Council of Experts, Manuel Guitián, Associate Director of the Monetary and Exchange Affairs Department at the International Monetary Fund, and Richard Portes, Director of CEPR and Professor of Economics at Birkbeck College, London. Financial support and hospitality provided by the Diputación Provincial de La Coruña are gratefully acknowledged. A volume of the papers presented at the conference is now available from CEPR.*

Taking Stock of the Past: The Origins of EMU

Presenting the first paper, `European Monetary Union: The Intellectual Pre-History', Max Corden (Johns Hopkins University, Washington) reviewed the academic literature and policy proposals of the 1960s and 1970s in the light of more recent theoretical advances. Mundell's pioneering work on optimal currency areas had emphasized the importance of the exchange rate instrument to countries facing asymmetric shocks but also highlighted the benefits to trade of stable exchange rates. The Werner Report in the early 1970s inspired a small literature in which Phillips curves reflected countries'...