The functioning of the Eurozone: Maastricht criteria and economic implications 2105-EPE-L-D4EUZO
The main objective of the course is to equip students with concepts and knowledge to answer two main questions: when can countries benefit from creating a monetary union and what are the benefits of joining a monetary union for a new member state. Through in-class discussions and case studies, students will gather arguments that will allow them to explain the stages of currency integration and the risks associated with this process.
The course starts with a reminder of basic issues and concepts related to the processes of monetary unification in Europe. Then, some issues of the macroeconomics of the open economy will be discussed, mainly related to the choice of exchange rate regime and consequences of fixing the exchange rate.
Then the costs and benefits of a common currency will be discussed. Particular emphasis is placed on the different sources of shock's asymmetry and ways of dealing with them.
The third part of this course will cover the creation and collapse of the European Monetary System. This would lead to introducing the Maastricht criteria and the problem of nominal convergence.
The next part outlines the implementation of monetary policy in the Eurozone and the role of the European Central Bank as well as the coordination of national fiscal policies. The course closes the discussion of the international role of the euro.
Type of course
Mode
Remote learning
Requirements
Prerequisites (description)
Course coordinators
Learning outcomes
The student acquires the following elements of knowledge, skills, and attitudes:
Knowledge
- Understanding the costs of monetary union,
- Understanding the gains from the elimination of exchange rate volatility and transaction costs,
- Understanding the theoretical foundations of the European Economic and Monetary Union,
- Knowledge of the processes leading to the introduction of the Euro,
- Understanding the fragility of incomplete monetary union,
- Understanding the role of the euro as the international currency.
Skills:
- Ability to conclude the progress made by the EU Member States in fulfilling their obligations regarding the achievement of economic and monetary union,
- Ability to evaluate the main weaknesses in EMU,
- Discussion of the implication of the national fiscal policies in the context of centralized European monetary policy,
- Ability use the empirical examples to the analysis of basic macroeconomics phenomena related to a common currency.
Attitudes:
- Ability to self-control by not being formally required to attend the lectures,
- Improvement in terms of responsibility developed through work as a part of a team.
Assessment criteria
The course ends with a written exam. Passing the exam will be awarded to students who obtain at least half of the points, while the final grade for the subject will be based on the weighted average of the points obtained from the in-class assignment (with a weight of 20%) and the exam (with a weight of 80%). The in-class presentation, prepared in groups, focuses on a specific country - the new EMU member state that joined the bloc after 2004. Students are expected to prepare and deliver an approximately 20-minute presentation on a specific country, e.g. costs and benefits of EMU membership, process meeting the nominal convergence criteria.
Bibliography
Required:
P. de Grauwe, "Economics of Monetary Union", 9th ed., Oxford University Press, 2012 (or subsequent editions).
Supplementary readings:
R. Baldwin and C. Wyplosz, "The Economics of European Integration", 5th ed.; McGraw Hill, 2015.
R. Feenstra and A. Taylor, "International Economics", 4th ed., Worth Publishers, 2017, Ch. 10
Other optional readings will be available on WNE Moodle course.
Additional information
Additional information (registration calendar, class conductors, localization and schedules of classes), might be available in the USOSweb system: