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Browsing by Subject "Economic and Monetary Union"

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  • An analysis of the European Central Bank presidents : how has the ECB monetary policy changed and what role have the presidents played in shaping the future of the Eurozone 
    Liukkonen, Jani (2021)
    This thesis aims at researching the recent history of the EMU and the monetary policy shift of the ECB in addition to its presidents roles in shaping the economy. This thesis will provide background information on the economic constitution of the EMU and how it has transformed over the course of Euro crisis and the years after. Additionally, the monetary policy actions of the ECB amongst Euro crisis and the COVID-19 pandemic will be studied. I argue that by transitioning to an expansionary monetary policy earlier than originally happened, some of the more severe economic impacts of the Euro crisis could have been prevented and it would not have led to a lost decade for the growth of the Eurozone. Additionally, I argue that the central bankers' implications for molding our future is enormous as it is clear that market actors react to their statements. My research questions are as follows: What problems or flaws have been identified within the EMU and how could they be improved? What are the presidents’ implications and effects on influencing the economy? Furthermore, how has the shift of the ECB monetary policy from hawks to doves happened over the years? This thesis utilizes critical discourse analysis in researching the materials, which comprise of the presidents annual hearings before the Plenary of the European Parliament, with the exclusion of the last nominated president as she has only been through one. In her case, quarterly Economic and Monetary Committee hearings will be utilized. The key findings suggest that the ECB presidents have viewed the EMU flawed and have emphasized the completion of the union as too much responsibility has been left for the ECB. The call for more fiscal capacity is repetitive for all three presidents. Furthermore, this research also suggests that the shift from hawks to doves happened because no other way was seen. Additionally, the roles of central bankers have been heightened during the recent history and it shows that they have a great influence on the economy based on the reactions by the market actors and the public.
  • To what extent can a Fiscal Union help overcome the inherent weaknesses of the EMU? 
    Vainio, Topias (2023)
    This thesis provides a comprehensive review of the extent a Fiscal Union can address the inherent weaknesses of insufficient policy coordination, limited risk-sharing mechanisms and incomplete Banking Union within the Economic and Monetary Union (EMU). Economic concerns over the functioning of the EMU have persisted since its establishment, but the COVID-19 pandemic has highlighted these intrinsic weaknesses. This paper focuses on a Fiscal Union primarily as an instrument of stabilisation given that the COVID-19 pandemic and earlier crises have underlined that the EMU is particularly vulnerable to economic shocks causing asymmetric effects across the union. This thesis compares the EMU currency area with the US currency area using the Optimum Currency Area (OCA) theory and finds that with less labour and capital mobility, the EMU would significantly benefit from a Fiscal Union to address arising imbalances. Furthermore, many of the intrinsic weaknesses of the EMU relate directly to the absence of fiscal integration given a single monetary policy. Striving towards a Fiscal Union for the euro area would help address the inherent weaknesses by improving monetary-fiscal policy coordination, providing better risk-sharing mechanisms and incentivising private markets to contribute effectively to risk-sharing. This paper finds that a Fiscal Union is more suitable acting as a stabilising function to counteract the asymmetric effects of aggregate shocks but less so in ensuring economic convergence across the union. Appropriate next steps are ensuring a fiscal backstop for the Banking Union, improving the monitoring of funds distributed by the Recovery and Resilience Facility (RRF), and stronger enforcement of fiscal rules set by the Stability and Growth Pact (SGP). Establishing a permanent crisis management mechanism similar to the NGEU would improve the union's readiness for future shocks. Without further progress to improve the resilience of the EMU, the union continues to face existential risk. Progress towards improving the competitiveness and resilience of the EMU cannot be categorically split into features relating to fiscal, economic, financial, and political integration, as these all affect each other. The interdependence of these aspects emphasises that on its own, a Fiscal Union cannot overcome the inherent weaknesses of the EMU. Therefore, it is fundamental to recognise that development toward a more resilient EMU requires progress within all these aspects.

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