On the possible costs of European Monetary Union

Article Abstract:

A model of two countries which established a monetary union was constructed to study the potential costsand benefits of European Economic and Monetary Union (EMU). The European Commission has calculated the total annual benefits of EMU to be about 1.4% to 1.7% GNP. The simulated EMU model considered the asymmetry of exchange rate regimes, government policies on price stability and industrial output and the relationship of monetary union with fiscal policies. The inflationary shocks, adjustment costs, and the effects of monetary union on exchange rate stability were discussed.

Finance, Monetary unions, European Monetary System

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The customs union issue reopened

Article Abstract:

Analysis of the customs union as a trade agreement supports the proposition that such an arrangement may not be dismissed as necessarily inefficient. A comprehensive study of the propositions and counter-propositions made by free trade advocates and protectionists alike from the fifties to the present indicates that unilateral tariff reductions are not necessarily superior to customs unions. The latter has the advantage of tariffs or transportation costs that provide a price differential not found in the former case.

Free trade, Customs unions

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Export subsidies, entry deterrence and countervailing tariffs

Article Abstract:

A Cournot oligopoly model is used to analyze the effects of domestic countervailing tariffs on a foreign export subsidy, granted to firms to deter the entry of competitors into an industry. Export subsidies will be effective deterrents only if the domestic country cannot retaliate with countervailing tariffs; otherwise, the foreign country should not subsidize exports, because such a retaliation negates the argument for entry-deterring export subsidies.

Trade policy, Commercial policy, Nontariff trade barriers, Export subsidies

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