Monetary Arrangements and Economic Performance

INTRODUCTION Before looking at the merits and likelihood of additional monetary integration in the Western Hemisphere and in East Asia, we turn our attention in this chapter to other monetary unions and ask how they have differed from EMU constitutionally and operationally. After that, we take on another important issue by examining the implications of monetary integration for economic performance, both in general and in the euro area. Our discussion of EMU in Chapter 3 stressed the many ways in which EMU is embedded in the institutional framework of the European Union. Some of those features may be unique to the European case, but other monetary unions, even those without comparable institutions, must deal with most of the questions that faced the architects of EMU. How is the union organized? How does a particular country qualify for membership? How is the union's monetary policy determined? Are the union's operations centralized or decentralized? And what, if anything, does monetary union imply for other policies of the member countries? Some of the monetary unions we highlight were not full-fledged monetary unions as we defined them in Chapter 1, because the countries involved did not share a single currency or hand over authority for monetary policy to a supranational central bank. Thus, our review of monetary unions past and present will show that only a few of them share features with EMU, although the EMU model has been important for the design of two prospective monetary unions, in western Africa and the Middle East.