Macroeconomic Policy Coordination and the European Monetary System

This paper discusses the EMS and proposals to move towards EMU in the context of recent theoretical and empirical work on international policy coordination. It treats two particular themes: asymmetry among EMS countries and its implications for policy coordination; and the coordination required to reach agreed European Community macroeconomic policies. Section 1 examines policy coordination in a fixed exchange rate system. Section 2 discusses policy coordination in the Delors Committee Report, with its emphasis on fiscal policies. Section 3 deals with asymmetry and hegemony, and Section 4 suggests reasons to strengthen "absolute" policy coordination in the EC.