THE EUROPEAN ECONOMY (Junior Sophister 1999/2000)

COURSE OUTLINE

The aim of this course is to equip students with a critical understanding of the economic issues in the EU debate. The course provides a blend of descriptive information, theory and empirical analysis. The emphasis is on economic issues but these issues are studied in their political and social context. Theoretical analysis forms an essential part of the course and requires knowledge of intermediate micro- and macroeconomics. Particular attention is devoted to policy areas in which EU co-ordination has progressed furthest: monetary integration, internal market, external trade policy, regional policy, factor mobility, agriculture, and competition policy.

The course is structured around six sections:

Module 1 (Professor Matthews)

I. Integration of product markets: customs union theory and its relevance for European integration.

II. Integration of factor markets: theory and the Single Market.

III. Current policies and issues: the economics of enlargement; agriculture, competition and industrial policies.

Module 2 (Professor McAleese)

IV. The global monetary system; post-war monetary integration in Western Europe; the evolution of EU institutions.

V. Theory and practice of monetary integration. Implications of the Euro for the EU economy. The role of the European Central Bank. Fiscal policy and the integrity of the Euro.

VI. Regional Issues in the EU; policies for 'regional counter-balancing': external trade policy of the EU.

Professor McAleese's module will begin in week 3 of Hilary Term.

ASSESSMENT

The final mark for this course will be calculated on the basis of two term assessments, counting for 15% each, and of an end-of-year examination in Trinity Term, counting for 70%. The assessments will consist of a test in week 10 of Michaelmas Term and an essay to be submitted no later then the end of week 10 of Hilary Term.

READING LIST

The course does not follow any single text book. There are separate reading lists for each section of the course. To supplement the assigned readings, students are advised to follow topical EU issues in the press (e.g. The Economist or The Financial Times).

MAIN TEXTS

McDonald, Frank and Dearden, Stephen (1998) European Economic Integration, 3rd edition, Longman.

Tsoukalis, Loukas (1997) The New European Economy Revisited, Oxford University Press. (accessible, non-technical introduction)

El-Agraa, A.M. (1998) The European Union, 5th edition, Prentice Hall.

Pelkmans, Jacques (1997) European Integration: Methods and Economic Analysis Longman.

De Grauwe, Paul (1997) The Economics of Monetary Integration, 3rd edition, Oxford University Press.

AHM/DMcA July 1999

This module provides a blend of descriptive information, theory and empirical analysis. Particular attention is devoted to policy areas in which EU co-ordination has progressed furthest in recent years: monetary and fiscal integration, regional policy, and external trade policy. The module is divided into 10 sections.

MAIN TEXTS

De Grauwe, Paul (1997) The Economics of Monetary Integration, 3rd edition, Oxford University Press

Pelkmans, Jacques (1997) European Integration: Methods and Economic Analysis, Longman

Useful reference textbooks:

Artis, M.J. and Lee, N. (1997) The Economics of the European Union, 2nd edition, Oxford University Press

El-Agraa, A.M. (1998) The European Union, 5th Edition, Prentice Hall

Begg and Von Hagen (1998) EMU: Prospects and Challenges for the Euro, Blackwell

McDonald, F and Dearden, S (1998) European Economic Integration, 3rd ed, Longman

Tsoukalis, Loukas (1997) The New European Economy Revisited, Oxford University Press.

TOPICS AND ADDITIONAL READING

1. Background to post-War monetary arrangements in Western Europe, the Bretton Woods system, Werner report, the European Monetary System, the Delors Report and the arrival of EMU

Reading:

Pelkmans (1997) ch 2, Molle (1994) chs 3, 4 , Artis (1997) chs 1, 12, 13

2. The role of the exchange rate, adjustment to shocks, how exchange rates function

Reading: De Grauwe (1997) chs 1, 2

3. Benefits and costs of a single currency in Europe, theory of optimum currency areas

Reading

De Grauwe (1997) ch. 2 and 3, Mundell, Robert (1961) 'A Theory of Optimal Currency Areas' American Economic Review, McKinnon, Ronald (1963) 'Optimum Currency Areas' American Economic Review

4. How to make a success of EMU: evaluation of the Maastricht criteria (conditions for entry to EMU) and the Stability and Growth Pact (requirements that the 'ins' must abide by)

Reading:

De Grauwe (1997) chs 8, 9 Obstfeld (1998)'Europe's Gamble' Brookings Papers on Economic Activity no 2 'EMU and the World Economy' IMF World Economic Outlook October 1997

5. The objectives, management and instruments of European monetary policy, the stability of the euro and the European Central Bank (ECB); role of national central banks

Reading: De Grauwe (1997) ch 9, Buiter WH (1999) 'Alice in Euroland' Journal of Common Market Studies June, Issing (1999) 'The Monetary Policy of the Eurosystem' Finance and Development March, Goodfriend (reference to be supplied)

6. International implications of EMU: euro vs the dollar and the yen, euro as an anchor currency, the euro and the 'outs'

Reading: Cooper (1999) 'Key Currencies after the Euro' World Economy January, Funke and Kennedy (1997) 'International Implications of EMU' OECD Working paper no 174

7. EMU and the Irish economy: the debate about entry, the challenges of membership, policies for maximising the benefits and minimising the downsides

Reading:

Baker, T. FitzGerald, J. and Honohan, P.(1996) Economic Implications for Ireland of EMU, ESRI, Neary J P and Thom, D.R (1997) 'Punts Pounds and euros: In search of an optimum currency area' IBAR - Journal of Irish Business Administration and Research ,McAleese, D (1996) 'Do We Need a Common European Currency?' Economia, Winter

8. Regional convergence in an integrated Europe, the need for a regional policies and regional 'balancing, the effectiveness of the Structural Funds

Reading:

Pelkmans (1997) ch. 15, El-Agraa (1998) ch 17, Artis (1997) ch 7, Fagerberg, J. and Verspagen, B. (1996) 'Heading for Divergence? Regional Growth in Europe Reconsidered' Journal of Common Market Studies, Honohan (ed) EU Structural Funds in Ireland: A mid-term evaluation ESRI July 1997, McAleese 'Twenty-five years a-growing: the Irish economy and EU Membership' in R O'Donnell (ed) Institute of European Affairs 1999 (forthcoming)

9. The external trade policy of the European Union: history, rationale, main features and recent developments; regional trade arrangements and the EU; the enlargement debate

Reading:

Pelkmans (1997) ch 13, Brulhart and McAleese 'External Trade Policy' in A El-Agraa The European Union Prentice Hall 2000 (forthcoming), Brenton and Pelkmans 'Free trade with the EU, driving forces and the effects of 'me- too' in O. Memevodic (ed) Multilateralism and Regionalism in the Post-Uruguay Round Era: What role for the EU? Kluwer 1999 (forthcoming)

10. Outlook for the European economy: challenge of establishing the euro, reducing European unemployment, enlargement and free trade areas

Reading:

'Challenges for Monetary and Fiscal Policies in the Euro Area' OECD Economic Outlook ch IV December 1998

DMcA 09/99