Introduction of the Euro and the Monetary

The Euro area is an extremely unique and important currency area for two reasons. First, it is the single largest currency area to be created in an industrialized region and is important as a test case for regions contemplating the establishment of new currency areas, such as East Asia and North America. Second, it was established by sovereign states working as peers, which, despite various challenges, peacefully and autonomously decided to create a single currency area. Marking the 10th anniversary of the creation of the European Central Bank (ECB) and The Euro, this invaluable book analyzes the monetary policy of the ECB - the guardian of the Euro - by using recently developed econometric methods. The analysis performed in this book marks a substantial contribution toward understanding the significance of the Euro area as well as the future of the Euro from an international perspective.

Preface	p. vii
About the Authors	p. xv
History of the EU Monetary Union	p. 1
Introduction	p. 1
Various Experiments Toward Achieving the Monetary Union	p. 1
Werner Report	p. 1
Snake	p. 5
European Monetary System (EMS)	p. 7
Contents of the Monetary Union	p. 11
Delors Report	p. 11
Maastricht Treaty	p. 13
EMI Report: The Changeover to the Single Currency	p. 15
Amsterdam Treaty	p. 16
EMI Roles	p. 19
Establishment and Organization	p. 19
Mission	p. 19
Authority	p. 23
Decision Process on State Participation in the Monetary Union	p. 24
EMU Participation Criteria	p. 24
Participation Criteria Fulfillment Conditions	p. 25
EMU Member State Decision Process	p. 28
General Overview	p. 29
Empirical Analysis of the Money Demand Function in the Euro Area	p. 31
Introduction	p. 31
Model	p. 34
Aggregate Data Analysis	p. 35
Data	p. 35
Demand for M1	p. 36
Demand for M2	p. 40
Demand for M3	p. 45
Panel Data Analysis	p. 48
Data	p. 48
Demand for M1	p. 49
Demand for M2	p. 52
Demand for M3	p. 54
Some Concluding Remarks	p. 57
Monetary Policy Rule of the European Central Bank	p. 59
Introduction	p. 59
The Taylor Rule	p. 61
Data	p. 63
Empirical Results	p. 65
Simple Taylor Rule	p. 65
The Role of Long-term Interest Rate	p. 67
Some Concluding Remarks	p. 69
Empirical Analysis of the Term Structure of Interest Rates in the Presence of Cross-Section Dependence	p. 71
Introduction	p. 71
Model	p. 73
Data	p. 75
Empirical Results	p. 76
Empirical Results with Cross-Section Independence	p. 76
Empirical Results with Cross-Section Dependence	p. 78
Some Concluding Remarks	p. 84
Are Budget Deficits Sustainable in the Euro Area?	p. 87
Introduction	p. 87
Model	p. 92
Data	p. 93
Empirical Results	p. 94
Some Concluding Remarks	p. 96
Yield Spread and Output Growth in the Euro Area	p. 99
Introduction	p. 99
Models	p. 102
Aggregate Data Analysis	p. 103
Data	p. 103
Empirical Results	p. 104
Panel Data Analysis	p. 107
Data	p. 107
Empirical Results	p. 108
Some Concluding Remarks	p. 112
International Capital Flows and the Feldstein-Horioka Paradox	p. 115
Introduction	p. 115
Data	p. 117
Empirical Model	p. 118
Empirical Results	p. 119
Sub-Sample Analysis	p. 122
Some Concluding Remarks	p. 123
Nominal and Real Exchange Rate Fluctuations: Euro, US Dollar, and Japanese Yen	p. 125
Introduction	p. 125
Data	p. 128
Bivariate System	p. 130
Empirical Techniques	p. 130
Empirical Results	p. 132
Trivariate System	p. 134
Empirical Techniques	p. 134
Empirical Results	p. 137
Some Concluding Remarks	p. 141
Euro Area Enlargement	p. 143
Introduction	p. 143
Existing EU Member State Group	p. 145
Greece	p. 145
Denmark	p. 147
The UK	p. 151
Sweden	p. 157
Accession Countries	p. 159
EMU Participants	p. 160
Slovenia	p. 160
Cyprus	p. 162
Malta	p. 164
Slovakia	p. 165
ERM II Participants	p. 167
Countries that are not ERM II Participants	p. 173
Outlook for the Future	p. 180
Panel FMOLS and Panel DOLS	p. 185
Bibliography	p. 187
Index	p. 197
Table of Contents provided by Ingram. All Rights Reserved.

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Introduction of the Euro and the Monetary Policy of the European Central Bank

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