Leader of the Pack? German Monetary Dominance in Europe Prior to EMU

20 Pages Posted: 14 Nov 2011

See all articles by J. James Reade

J. James Reade

University of Reading, Department of Economics

Ulrich Volz

University of London - School of Oriental and African Studies (SOAS) - Economics; Deutsches Institut für Entwicklungspolitik (DIE) - German Development Institute (DIE)

Date Written: January 15, 2009

Abstract

In this paper, the monetary policy independence of European nations in the years before European Monetary Union (EMU) is investigated using cointegration techniques. Daily data is used to assess pairwise relationships between individual EMU nations and ‘lead’ nation Germany, to assess the hypothesis that Germany was the dominant European nation prior to EMU. By and large our econometric investigations support this hypothesis, and lead us to conclude that the only European nation to lose monetary policy independence in the light of monetary union was Germany.

Keywords: monetary policy independence, European monetary integration, cointegrated VAR method

JEL Classification: E52, E58, F41, F42, C32

Suggested Citation

Reade, J. James and Volz, Ulrich, Leader of the Pack? German Monetary Dominance in Europe Prior to EMU (January 15, 2009). Economic Modelling, Vol. 28, No. 1-2, 2011. Available at SSRN: https://ssrn.com/abstract=1959066

J. James Reade

University of Reading, Department of Economics ( email )

Whiteknights
Reading, Berkshire RG6 6AH
United Kingdom

Ulrich Volz (Contact Author)

University of London - School of Oriental and African Studies (SOAS) - Economics

London, WC1E 7HU
United Kingdom

Deutsches Institut für Entwicklungspolitik (DIE) - German Development Institute (DIE) ( email )

Tulpenfeld 4
Bonn, 53113
Germany

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