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International Finance Discussion Papers
The International Finance Discussion Papers logo links to the International Finance Discussion Papers home page European Integration, Exchange Rate Management, and Monetary Reform: A Review of the Major Issues
Garry J. Schinasi
1989-364  (October 1989)

Abstract:  Since the adoption of the Single European Act in 1986, doubts have been expressed about the ability of the European Monetary System as presently structured to ensure an efficient and effective monetary system for the single European market. The further adoption by the European Council (June 1989) of the Report on Economic and Monetary Union (the Delors report) moves the European Community towards even greater monetary integration.

Policy discussions have focussed on perceived problems with the current institutional and political structure of the European Monetary System and its exchange rate mechanism. Some have stressed that the current system is inherently asymmetric in the sense that it places greater burdens of adjustment on countries whose currencies are in less demand. Others have stressed that the objectives of fixed exchange rates, free capital mobility, and the autonomy of national monetary policies cannot simultaneously be achieved. Others emphasize that not only is closer monetary policy coordination required but so is greater coordination in other policies including budgetary, tax, and trade policies. This paper reviews these and other issues relating to monetary integration in Europe. While the discussion attempts to highlight important aspects and implications of these issues, and attempts to present the many points of view, it does not attempt to resolve these issues

Full paper(544 KB PDF)

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