Abstract
The paper addresses some similarities and differences in the institutional set-up of the classical gold standard and European Monetary Union (EMU). I argue that giving up monetary nationalism and committing to the rules of either the gold standard or EMU initially seemed to restrict the scope of state action. Therefore, the euro – like previously the gold standard – provided some (fiscal) policy credibility. Policy credibility was a main determinant of capital market integration and low government borrowing costs in Europe under both systems. However, I shall emphasize that the membership in the gold or euro club itself did not force reforms and spending cuts upon countries that faced crisis and debt problems. The article suggests that the institutional set-ups of the gold standard and EMU determined the degree of commitment to them and the way in which countries reacted to deal with debt problems.
The paper was originally prepared for CEVRO, Prague.
References
Aßmann, C., and J.Boysen-Hogrefe. 2012. “Determinants of Government Bond Spreads in the Euro Area: In Good Times as in Bad.” Empirica39(3):341–56.10.1007/s10663-011-9171-6Search in Google Scholar
Barrios, S., P.Iversen, M.Lewandowska, and R.Setzer. 2009. “Determinants of Intra-Euro Area Government Bond Spreads During the Financial Crisis.” European Economy – Economic Papers 388.Search in Google Scholar
Bernoth, K., J.von Hagen, and L.Schuknecht. 2004. “Sovereign Risk Premia in the European Government Bond Market.” ECB Working Paper Series No.369.10.2139/ssrn.533129Search in Google Scholar
Bordo, M., and H.Rockoff. 1996. “The Gold Standard as a ‘Good Housekeeping Seal of Approval’.” Journal of Economic History56(2):389–428.10.1017/S0022050700016491Search in Google Scholar
Codogno, L., C.Favero, and A.Missale. 2003. “Yield Spreads on the EMU Government Bonds.” Economic Policy18(37):503–32.10.1111/1468-0327.00114_1Search in Google Scholar
Côté, D., and C.Graham. 2004. “Convergence of Government Bond Yields in the Euro Zone: The Role of Policy Harmonization.” Bank of Canada Working Paper 2004-23.Search in Google Scholar
De Grauwe, P.2009. Economics of Monetary Union. Oxford, UK: Oxford University Press.Search in Google Scholar
De Grauwe, P., and Y.Ji. 2013. “Panic-Driven Austerity in the Eurozone and Its Implications.” VOXEU.ORG Blog, 21 February 2013.Search in Google Scholar
Huerta De Soto, J.2012. “An Austrian Defense of the Euro.”Mises Daily, June 22.Search in Google Scholar
Ebner, A.2009. “An Empirical Analysis on the Determinants of CEE Government Bond Spreads.” Emerging Markets Review10(2):97–121.10.1016/j.ememar.2009.02.001Search in Google Scholar
Égert, B., P.Backé, and T.Zumer. 2006.Credit Growth in Central and Eastern Europe – New (Over)Shooting Stars? European Central Bank Working Paper No. 687.10.2139/ssrn.949493Search in Google Scholar
Eichengreen, B., and H.James. 2003. “Monetary and Financial Reform in Two Eras of Globalization.” In Globalization in Historical Perspective, edited by M.Bordo et al.,515–48. NBER, Chicago: University of Chicago Press.10.7208/chicago/9780226065991.003.0012Search in Google Scholar
Flandreau, M., and F.Zúmer. 2004. The Making of Global Finance. Paris: OECD.Search in Google Scholar
Flandreau, M., J.Le Cacheux, and F.Zumer. 1998. “Stability without a Pact? Lessons from the European Gold Standard 1880–1914.” Economic Policy13(26):117–62.10.1111/1468-0327.00030Search in Google Scholar
Frankel, J., and A.Rose. 1998. “The Endogeneity of the Optimum Currency Area Criteria.” Economic Journal108(449):1003–25.Search in Google Scholar
Hallerberg, M., and G.Wolff. 2008. “Fiscal Institutions, Fiscal Policy and Sovereign Risk Premia in EMU.” Public Choice136(3):379–96.10.1007/s11127-008-9301-2Search in Google Scholar
Hoffmann, A.2010. “An Overinvestment Cycle in Central and Eastern Europe?” Metroeconomica61(4):711–34.10.1111/j.1467-999X.2010.04103.xSearch in Google Scholar
López-Córdova, E., and C.Meissner. 2003. “Exchange-Rate Regimes and International Trade: Evidence from the Classical Gold Standard Era.” American Economic Review93(1):344–53.10.1257/000282803321455331Search in Google Scholar
Luengnaruemitchai, P., and S.Schadler. 2007. “Do Economists’ and Financial Markets’ Perspectives on the New Members of the EU Differ?” IMF Working Paper No. 07/65.10.5089/9781451866292.001Search in Google Scholar
Mauro, P., N.Sussman, and Y.Yafeh. 2007. Emerging Markets and Financial Globalization: Sovereign Bond Spreads in 1870–1913 and Today. New York, United States: Oxford University Press.10.1093/0199272697.001.0001Search in Google Scholar
Mundell, R.1961. “A Theory of Optimum Currency Areas.” American Economic Review51(4):657–65.Search in Google Scholar
Obstfeld, M., and A.Taylor. 2003. “Sovereign Risk, Credibility and the Gold Standard: 1870–1913 vs. 1925–1931.” Economic Journal113(2):241–75.10.1111/1468-0297.00128Search in Google Scholar
Poterba, J., and K.Rueben. 2001. “Fiscal News, State Budget Rules, and Tax-Exempt Bond Yields.” Journal of Urban Economics50:537–62.10.1006/juec.2001.2233Search in Google Scholar
Reinhart, C., and K.Rogoff. 2011. “From Financial Crash to Debt Crisis.” American Economic Review101(5):1676–706.10.1257/aer.101.5.1676Search in Google Scholar
Schnabl, G., and H.Zemanek. 2011. “Inter-Temporal Savings, Current Account Trends and Asymmetric Shocks in a Heterogeneous European Monetary Union.” Intereconomics: Review of European Economic Policy46(3):153–60.10.1007/s10272-011-0377-4Search in Google Scholar
Schularick, M., and T.Steger. 2010. “Financial Integration, Investment, and Economic Growth: Evidence from Two Eras of Financial Globalization.” Review of Economics and Statistics92(4):756–68.10.1162/REST_a_00027Search in Google Scholar
Sylla, R., and J.Wallis. 1998. “The Anatomy of Sovereign Debt Crises: Lessons From the American State Defaults of the 1840s.” Japan and the World Economy10:267–93.10.1016/S0922-1425(97)00034-0Search in Google Scholar
©2013 by Walter de Gruyter Berlin / Boston