Real Sources of European Currency Policy: Sectoral Interests and European Monetary Integration

Abstract

For more than thirty years, until the completion of Economic and Monetary Union (EMU), the member states of the European Union (EU) attempted to fix regional exchange rates. Naturally enough, most explanations of this process emphasize its monetary sources and effects. Some focus on how creating a multinational currency area might increase the efficacy of monetary policy. Others stress how fixing a national currency to a low-inflation monetary anchor, or adopting a single low inflation currency, might enhance the anti-inflationary credibility of national monetary policies. In these views, European monetary integration was motivated by the belief that, by themselves, national monetary authorities would be unable or unwilling to pursue appropriate monetary policies.