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Article
Publication date: 1 March 1994

A Two‐speed Monetary Union in Europe

Colin Turner

The recent crisis in the ERM has meant EMU can no longer proceed alongthe lines proposed in the Maastricht Treaty. Proposes that a two oreven multi‐speed EMU should emerge…

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Abstract

The recent crisis in the ERM has meant EMU can no longer proceed along the lines proposed in the Maastricht Treaty. Proposes that a two or even multi‐speed EMU should emerge from the crisis. This would be based on a “hardcore” which would form the basis for exchange rate/macro policy management for “softer” countries.

Details

European Business Review, vol. 94 no. 1
Type: Research Article
DOI: https://doi.org/10.1108/09555349410050703
ISSN: 0955-534X

Keywords

  • EFTA
  • EMU
  • ERM
  • Europe
  • European Union

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Article
Publication date: 1 July 2006

Democratic accountability and economic reality: Hungary's membership of the European Monetary System

Emese Peter Fáyné

The absorption of the New Member States (NMS) after the 2004 enlargement and their integration into Economic and Monetary Union (EMU) is perhaps the most important…

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Abstract

Purpose

The absorption of the New Member States (NMS) after the 2004 enlargement and their integration into Economic and Monetary Union (EMU) is perhaps the most important challenge facing the European Union (EU). The article seeks to address the issues.

Design/methodology/approach

The article is based upon observations of contemporary events within Hungary and relates the political process with issues of fiscal governance.

Findings

The NMS of the EU, unlike Great Britain and Denmark will not have an “opt‐out” – the right to remain outside EMU. Indeed, the NMS have declared that they want to join the monetary system as soon as is feasible. This is the next major step in the integration process for Hungary. In particular, the article observes that there has been an electoral business cycle which overrides Hungary's longer term commitment to qualify for EMU and provides an insight into the process of achieving EMU membership in one NMS.

Originality/value

The article discusses how Hungary has elaborated its strategy for entry into EMU, but the target date has been changed mainly because of the problems of significant budget deficits. This inability to maintain consistent progress towards entry indicates that there are issues of fiscal governance which need to be resolved.

Details

Managerial Law, vol. 48 no. 4
Type: Research Article
DOI: https://doi.org/10.1108/03090550610681204
ISSN: 0309-0558

Keywords

  • European Union
  • Hungary
  • Size enlargement
  • Monetary policy

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Article
Publication date: 1 March 2003

Fiscal constitutionalism in the economic and Monetary Union

Thomas Bräuninger

The Maastricht process sets up economic and fiscal criteria that member states of the European Union are expected to meet in the preparation for and when having joined the…

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Abstract

The Maastricht process sets up economic and fiscal criteria that member states of the European Union are expected to meet in the preparation for and when having joined the third stage of Economic and Monetary Union (EMU). According to EMU rules, the Commission monitors the fiscal behavior of the participants but member states themselves-as members of the Council of Ministers-finally vote on the Commission recommendations. It is therefore questionable whether these criteria actually constrain member states from running excessive deficits. This paper adopts a constitutionalist perspective to address this question by asking how member states will interpret or even change the fiscal rules of the EMU in the future. Council decision-making in the area of EMU politics is analyzed using data on the fiscal positions of old and new member states of the European Union. The findings suggest that the recent enlargement will shift policy outcomes, but, if compared to the situation at the time of the signing of the Maastricht treaty, the effect is rather marginal.

Details

International Journal of Organization Theory & Behavior, vol. 7 no. 4
Type: Research Article
DOI: https://doi.org/10.1108/IJOTB-07-04-2004-B003
ISSN: 1093-4537

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Article
Publication date: 18 May 2015

Rating sovereign debt in a monetary union – original sin by transnational governance

Finn Marten Körner and Hans-Michael Trautwein

The purpose of this paper is to test the hypothesis that major credit rating agencies (CRAs) have been inconsistent in assessing the implications of monetary union…

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Abstract

Purpose

The purpose of this paper is to test the hypothesis that major credit rating agencies (CRAs) have been inconsistent in assessing the implications of monetary union membership for sovereign risks. It is frequently argued that CRAs have acted procyclically in their rating of sovereign debt in the European Monetary Union (EMU), underestimating sovereign risk in the early years and over-rating the lack of national monetary sovereignty since the onset of the Eurozone debt crisis. Yet, there is little direct evidence for this so far. While CRAs are quite explicit about their risk assessments concerning public debt that is denominated in foreign currency, the same cannot be said about their treatment of sovereign debt issued in the currency of a monetary union.

Design/methodology/approach

While CRAs are quite explicit about their risk assessments concerning public debt that is denominated in foreign currency, the same cannot be said about their treatment of sovereign debt issued in the currency of a monetary union. This paper examines the major CRAs’ methodologies for rating sovereign debt and test their sovereign credit ratings for a monetary union bonus in good times and a malus, akin to the “original sin” problem of emerging market countries, in bad times.

Findings

Using a newly compiled dataset of quarterly sovereign bond ratings from 1990 until 2012, the panel regression estimation results find strong evidence that EMU countries received a rating bonus on euro-denominated debt before the European debt crisis and a large penalty after 2010.

Practical implications

The crisis has brought to light that EMU countries’ euro-denominated debt may not be considered as local currency debt from a rating perspective after all.

Originality/value

In addition to quantifying the local currency bonus and malus, this paper shows the fundamental problem of rating sovereign debt of monetary union members and provide approaches to estimating it over time.

Details

The Journal of Risk Finance, vol. 16 no. 3
Type: Research Article
DOI: https://doi.org/10.1108/JRF-11-2014-0171
ISSN: 1526-5943

Keywords

  • Monetary union
  • Credit rating agencies
  • Eurozone debt crisis
  • Rating methodologies
  • Sovereign debt
  • E42, F32, F33, G24, H63

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Article
Publication date: 31 August 2010

An analysis of the perceived effects of economic and monetary union on hotels in the north of Portugal: Implications for management

Carla Pinto Cardoso, Roger Vaughan and Jonathan Edwards

The purpose of this paper is to reflect on the perceived implications of economic and monetary union (EMU) as a driver for changes in the hotel business environment and…

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Abstract

Purpose

The purpose of this paper is to reflect on the perceived implications of economic and monetary union (EMU) as a driver for changes in the hotel business environment and, consequently, on Portuguese competitiveness, in terms of the conceptual framework and methodology adopted and showing the way how it may contribute to help managers and decision makers to effectively manage their competitive strategies.

Design/methodology/approach

The paper adopted and adapted Porter's models (Diamond, Five Forces and Value Chain) as the basis for analysing the implications of EMU upon the hotel business environment (at national, industry and operational level). Those implications are the ones perceived by the stakeholders in that sector: public authorities, trade associations and hoteliers.

Findings

The findings indicated that EMU not only changed the hotel business environment at a national level, but also changed the competitive and operational environment. Nonetheless, as this study found, the hotel stakeholders had relatively different hopes and fears concerning EMU.

Practical implications

The paper offers a conceptual framework sufficiently versatile (regarding the context of the study) which can be used by decision makers or managers as a tool to understand their business environment and, consequently, to cope with potential challenges.

Originality/value

Two of the innovative features of this study are: the triangulation of perspectives on the implications of EMU on hotels and the use of a combination of Porter's models as a suitable tool for studying the implications of EMU in the services sector. This can be useful to service decision makers and managers that seek to cope with the business environment challenges.

Details

Worldwide Hospitality and Tourism Themes, vol. 2 no. 4
Type: Research Article
DOI: https://doi.org/10.1108/17554211011074065
ISSN: 1755-4217

Keywords

  • European monetary union
  • Business environment
  • Competitive strategy
  • Portugal
  • Hotel and catering industry

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Book part
Publication date: 23 October 2017

Updating the Evidence on Risk-Sharing through the Cross-Ownership of Assets in the Euro-Area

Pasquale Foresti and Oreste Napolitano

Risk-sharing is a crucial issue in order to evaluate the performance of a monetary union. By implementing conventional econometric techniques, this paper intends to…

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Abstract

Risk-sharing is a crucial issue in order to evaluate the performance of a monetary union. By implementing conventional econometric techniques, this paper intends to estimate the degree of risk-sharing through the cross-ownership of assets within 11 European countries in the period 1971–2014. We show that risk-sharing has been increasing after the launch of the euro due to increased cross-ownership of assets. Nevertheless, we also show that despite the extreme needs for adjustment mechanisms as a reaction to asymmetric shocks in the EMU during the crises, the estimated market risk-sharing mechanism seems to have remained marginal in this period. We also show that the degree of asymmetry (potential benefits from risk-sharing) has declined with the start of the EMU, but it has sharply increased during the crises period. This implies that EMU countries have needed good functioning risk-sharing mechanisms during the crisis, while in this period their estimated performance does not seem to have improved. We interpret these results as the evidence of a missing element of the EMU that forced governments to intervene by means of fiscal policy to tackle the imbalances deriving from the financial crisis. Therefore, we conclude that the weakness in the risk-sharing has been one of the channels that allowed the global financial crisis to mutate in a sovereign debt crisis in the EMU.

Details

Economic Imbalances and Institutional Changes to the Euro and the European Union
Type: Book
DOI: https://doi.org/10.1108/S1569-376720170000018009
ISBN: 978-1-78714-510-8

Keywords

  • Capital markets
  • EMU assets cross-ownership
  • income insurance
  • financial integration
  • E44
  • G22
  • O16

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Book part
Publication date: 7 October 2015

High-Speed Rail Implementation

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Abstract

Details

Chinese Railways in the Era of High-Speed
Type: Book
DOI: https://doi.org/10.1108/978-1-78441-985-120151004
ISBN: 978-1-78441-984-4

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Book part
Publication date: 4 December 2006

From the Stability and Growth Pact to a Sustainability Council for EMU

Jurgen von Hagen

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Abstract

Details

Designing the New European Union
Type: Book
DOI: https://doi.org/10.1016/S0573-8555(06)79006-X
ISBN: 978-1-84950-863-6

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Article
Publication date: 27 May 2014

Money factors and EMU government bond markets' convergence

Dionisis Philippas and Costas Siriopoulos

– The authors aim to investigate the cointegrating relationship of the government bond yields, driven by the common money factors in European Monetary Union (EMU).

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Abstract

Purpose

The authors aim to investigate the cointegrating relationship of the government bond yields, driven by the common money factors in European Monetary Union (EMU).

Design/methodology/approach

By adopting a dynamic ARDL transformation, the paper provides short-/long-term estimates of bond yields convergence before the burst of the current debt crisis. It also investigates how the degree of convergence between bond yields, driven by money factors, is affected in short/long runs.

Findings

The findings indicate that the introduction of the common currency has not a uniform effect on the bond yields, and there is a nominal convergence between EMU bond yields based on money market determinants.

Originality/value

The current financial crisis indicates that the EMU bond market convergence was temporary and it can be highly affected by an exogenous shocks and the sentiment of international investors. The findings imply the necessity for a common monetary and fiscal policy in Euro zone countries.

Details

Studies in Economics and Finance, vol. 31 no. 2
Type: Research Article
DOI: https://doi.org/10.1108/SEF-11-2012-0133
ISSN: 1086-7376

Keywords

  • Convergence
  • ARDL model
  • Euribor interest rates
  • Euro exchange rate
  • Government bond yields
  • European monetary union

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Article
Publication date: 21 August 2017

Asset liability management and the euro crisis: Sovereign credit risk as a challenge for the German life insurance industry

Miguel Rodriguez Gonzalez, Frederik Kunze, Christoph Schwarzbach and Christoph Dieng

This paper aims to investigate the long-term relationships of long-term European Monetary Union (EMU) government bond yields. From an asset managers’ or risk managers…

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Abstract

Purpose

This paper aims to investigate the long-term relationships of long-term European Monetary Union (EMU) government bond yields. From an asset managers’ or risk managers’ perspective during the euro crisis, the relevance of sovereign credit and redenomination risk became a major issue. Furthermore, it has to be differentiated between core and non-core EMU member countries.

Design/methodology/approach

Methods of applied time series analysis are used to investigate EMU government bond yields and EMU government bond yield spreads for Spain, Italy, The Netherlands, Austria and Germany. Both standard unit root testing procedures and breakpoint unit root tests are used to examine cointegrating relationships and structural changes in these relationships.

Findings

The empirical results deliver clear evidence for structural shifts in the long-term relationship between German and the two non-core EMU countries (Italy and Spain). The timing of the breaks coincides with the timing of the euro crisis. On the contrary, the results for Austria and The Netherlands are different from the findings for the two non-core countries.

Research limitations/implications

One major limitation of the study is the limited availability of data regarding to the reaction of asset managers or risk managers to the euro crisis. Especially in the context of the discussion with regard to the relevant risk-free rate for investors, this strand of research is relatively new.

Practical implications

A deeper understanding of changes in the long-term relationship between government bond yields and the re-emergence of redenomination risk is important for asset managers and risk managers in the financial services industry. This is especially true for German life insurers.

Originality/value

The study provides various empirical contributions to the literature on the euro crisis and sovereign credit risk. First, previous results with regard to the structural changes in the long-term relationship between German and Spanish, German and Italian, German and Austrian as well as Germany and Dutch government bond yields are confirmed using unit root breakpoint tests. Second, investigating the autoregressive coefficient and the timing of the breaks delivers evidence that non-core countries have been more exposed to the fear of redenomination risk. Third, we raise the question which risk free interest rate is relevant for the affected countries.

Details

The Journal of Risk Finance, vol. 18 no. 4
Type: Research Article
DOI: https://doi.org/10.1108/JRF-01-2017-0016
ISSN: 1526-5943

Keywords

  • Sovereign credit risk
  • Asset liabilty management
  • European monetary union
  • Life insurance sector
  • Redenomination risk

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