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Journal of Economic Perspectives: Vol. 11 No. 4 (Fall 1997)

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The Political Economy of the European Economic and Monetary Union: Political Sources of an Economic Liability

Article Citation

Feldstein, Martin. 1997. "The Political Economy of the European Economic and Monetary Union: Political Sources of an Economic Liability." Journal of Economic Perspectives, 11(4): 23-42.

DOI: 10.1257/jep.11.4.23

Abstract

EMU would be an economic liability. A single currency would cause, at most, small trade and investment gains but would raise average cyclical unemployment and possibly raise inflation, perpetuate structural unemployment, and increase the risk of protectionism. EMU is nevertheless being pursued in order to create a political union. Fundamental disagreements among member states about economic policies, foreign and military policies, and the sharing of political power are likely to create future intra-European conflicts. A United Europe would be a formidable participant in the twenty-first century's global balance of power, with uncertain consequences for world stability and peace.

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Authors

Feldstein, Martin (Harvard U and NBER)

JEL Classifications

F02: International Economic Order
F15: Economic Integration
F36: Financial Aspects of Economic Integration

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