In these papers, leading international experts address the instability of the transition to EMU.

The Maastricht Treaty, signed in December 1991, set a timetable for the European Community's economic and monetary union (EMU) and clearly defined the institutional policy changes necessary for its achievement. Subsequent developments have demonstrated, however, the importance of many key issues in the transition to EMU that were largely neglected at the time. This volume reports the proceedings of a joint CEPR conference with the Banco de Portugal, held in January 1992. In these papers, leading international experts address the instability of the transition to EMU, the long-run implications of monetary union and the single market for growth and convergence in Europe. They also consider the prospects for inflation and fiscal convergence, regional policy and the integration of financial markets and fiscal systems. Attention focuses on adjustment mechanisms with differentiated shocks, region-specific business cycles and excessive industrial concentration and the cases for a two-speed EMU and fiscal federalism.

1. Introduction Francisco Torres and Francesco Giavazzi
2. Economic and monetary union: critical notes on the Maastricht Treaty revisions Niels Thygesen
Discussion Lorenzo Bini Smagha, Victor Gaspar, Jose Vinals
3. The design of optimal fiscal rules for Europe after 1992 Giancarlo Corsetti and Nouriel Roubini
Discussion Axel A. Weber
4. Contracts, credibility and common knowledge: their influence on inflation convergence Marcus Miller and Alan Sutherland
Discussion David Backus, Michael Dooley
5. Inflation in fixed exchange regimes: the recent Portuguese experience Sergio Rebelo
Discussion Michael Moore, Guido Tabellini
6. Models of economic integration and localised growth Giuseppe Bertola
Discussion Joao Cesar das Neves, Charles Wyplosz
7. Shocking aspects of European monetary integration Tamim Bayoumi and Barry Eichengreen
Discussion Giorgio Basevi, Patrick Minford
8. Lessons of Massachusetts for EMU Paul Krugman
Discussion Alessandra Casella, Paul de Grauwe
9. Financial and currency integration in the European monetary system: the statistical record Jeffrey Frankel, Steven Phillips and Menzie Chinn
Discussion Rudiger Dornbusch, Paolo Onofri
10. Currency substitution: from the policy questions to the theory and back Matthew Canzoneri, Behzad Diba and Alberto Giovannini
Discussion Lucas Papademos, Antonio S. Mello
11. Coordination of capital income taxes in the economic and monetary union: what needs to be done? Peter B. Sorenson
Discussion Alberto Giovannini
Index.