The Political Economy of Monetary Solidarity: Understanding the Euro Experiment by Waltraud SchelkleThe Political Economy of Monetary Solidarity: Understanding the Euro Experiment by Waltraud Schelkle

The Political Economy of Monetary Solidarity: Understanding the Euro Experiment

byWaltraud Schelkle

Hardcover | May 20, 2017

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Creating the European monetary union between diverse and unequal nation states is arguably one of the biggest social experiments in history. This book offers an explanation of how the euro experiment came about and was sustained despite a severe crisis, and provides a comparison with themonetary-financial history of the US.The euro experiment can be understood as risk-sharing through a currency that is issued by a supranational central bank. A single currency shares liquidity risks by creating larger markets for all financial assets. A single monetary policy responds to business cycles in the currency area as a wholerather than managing the path of one dominant economy. Mechanisms of risk-sharing become institutions of monetary solidarity if they are consciously maintained, but they will periodically face opposition in member states. This book argues that diversity of membership is not an economic obstacle to the success of the euro, as diversity increases the potential gains from risk sharing. But political cooperation is needed to realize this potential, and such cooperation is up against collective action problems whichbecome more intractable as the parties become more diverse. Hence, risk-sharing usually comes about as a collective by-product of national incentives. This political-economic tension can explain why the gains from risk-sharing are not more fully exploited, both in the euro area and in the US dollararea. This approach to monetary integration is based on the theory of collective action when hierarchy is not available as a solution to inter-state cooperation. The theory originates with Keohane and Ostrom (1995) and it is applied in this book, taking into account the latest research on the inherentinstability of financial market integration.
Waltraud Schelkle is Associate Professor of Political Economy at the European Institute, London School of Economics and Political Science. She is also an Adjunct Professor of Economics at the Free University of Berlin.
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Title:The Political Economy of Monetary Solidarity: Understanding the Euro ExperimentFormat:HardcoverDimensions:416 pagesPublished:May 20, 2017Publisher:Oxford University PressLanguage:English

The following ISBNs are associated with this title:

ISBN - 10:0198717938

ISBN - 13:9780198717935

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Table of Contents

1. Introduction: Understanding the Euro ExperimentPart I: Building Blocks2. The Political Economy of Monetary Solidarity3. Evidence for Economic Risk-Sharing Between StatesPart II: Evolving Monetary Unions of Limited Risk-Sharing4. A Short History of Risk-Sharing in the US Monetary Union5. The System of Limited Risk-Sharing in the Euro Area6. The Euro Area Crisis as a Stress Test for Monetary Solidarity7. Monetary Solidarity by Default and by DesignPart III: Solidarity in Action8. Social Solidarity in Labour Market Integration9. Monetary Solidarity in Financial Integration10. The Experiment of the Euro