Forming an Economic Union

Paper Summary:

This paper discusses the advantages and disadvantages of forming an economic union, and possibly a monetary union to which members could, subject to conditions, apply to join. Factors such as possible membership, timetable, trade and investment effects, convergence of economies, economic and social consequences and administrative structure are covered briefly, yet concisely. The experiences of the European Union/Monetary Union are used as support for the arguments which are presented in the paper.

Outline:
Introduction
Background of the study
The Aim of an Economic Union
The Disadvantages of an Economic Union
Economic Union and the Dilemma of Collective Action
Arguments Against an Economic Union
Advantages for an Economic Union
Conclusion

From the Paper:

"A vital question for the triumph of an economic union is whether the economic union placed by an autonomous, supranational central bank in addition to fiscal (and other) procedures managed by a national government is helpful not only to price-steadiness but also towards economic development. This concern related to an economic union stems mainly from the commencement of the euro during 1999. Since the Euro inception, there has been a constant flow of disapproval concerning the EU'S system for economic union and harmonization. The Stability and Growth Pact (SGP) - perhaps, the most well-known aspects of union -- has been constantly criticized by economists as an unimagined, dull and eventually counter-productive procedure that encourages pro-cyclic fiscal procedures, slows down economic revival and harms the durable growth prospective of the EU financial system. In addition, accusation has also been cited, quite frequently, against the incapability of the policy structure to provide a logical policy blend, as well as, laments the deficient of suppleness in policy management (Fitoussi and Creel, 2002)."

Sample of Sources Used:

• ASEAN Finance and Macroeconomic Surveillance Unit (FMSU) Database (compiled/computed from data submission and/or websites of ASEAN Member Countries' national statistical offices, central banks, and other relevant government agencies) International Monetary Fund - World Economic Outlook Database (online edition), September 2005. Accessed on 8TH September, 2006. http://www.aseansec.org
• Agell J., Calmfors, L. and Jonsson, G. (1996), 'Fiscal policy when monetary policy is tied to the mast', European Economic Review, 40, pp. 1413-40.
• Aizenman, J. (1994), 'On the need for fiscal discipline in an union', National Bureau of Economic Research Working Paper W4656.
• Alesina, A., Blanchard, O., Gali, J., Giavazzi, F. and Uhlig, H. (2001) Defining a Macroeconomic Framework for the Euro Area: Monitoring the European Central Bank 3, London, CEPR.
• Alfredo C.R. (2004). The Political Economy of Interregional Relations: Asean and the Eu (The International Political Economy of New Regionalisms Series). Ashgate Publishing.

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