Volume 222, Issue 1

This paper reviews the literature on asymmetric monetary transmission within the European Monetary Union (EMU). At first, a stylized model is presented in order to highlight the importance of asymmetric monetary transmission for the decision-making of the European Central Bank (ECB). The transmission mechanism is then decomposed into several subsequent stages. Various macroeconomic indicators for the EU countries related to financial, goods and labor markets are then used to assess the empirical relevance of asymmetries across the EU countries. Then, models of a monetary union are used to assess to which extent cross-country differences in individual channels of transmission translate into differences in the overall strength of monetary transmission in Europe. Finally, the paper assesses the extent to which the transmission patterns in Europe converge as a result of the establishment of EMU. The paper finds the empirical evidence on cross-country differences in the policy impact to be inconclusive and provides suggestions for further theoretical and empirical research.

How many people from Central and Eastern Europe (CEEC) will go West making use of the free movement of people after the EU East enlargement? An extrapolation of the empirical experience of the EU South enlargement shows that the emigration potential might reach a corridor between 0.2 % to 0.4 % of total CEEC-population per year. Annual net migraton (including return migration) might be about 0.1 % of total CEEC-population. If we assume that in a first wave 8 countries from CEEC will become EU members (i. e. Slovenia, Czech Republic, Hungary, Slovk Republic, Poland, Estonia, Lithuania, Latvia), the East-West migration potential will be about 3 % - 4 % (gross) and 11/2 % - 2% (net) of the total CEEC-population within the first 15 years after accession. This is about 3 million people (gross) resp. 1 to 1.5 million people (net) or about 0.8.% of the total EU population. Therefore, fears of "mass migration" seem highly exaggerated. Muchmore, with regard to the decline of the EU population and the ageing of the society the expected East-West-migration potentials will generate rather positive consequences.

Since the study of Feldstein/Horioka (1980), the high correlation between investment and saving rates is a controversial, but first of all often confirmed empirical evidence. In this paper, this correlation is investigated once again for the EU-countries in the time period from 1960 to 1997. In expansion of previous analyses, in our analysis based on time series, on the one hand different degrees of capital mobility for the individual countries are admitted, and on the other hand, we distinguish between the long-term and short-term relations between the variables of interest. Taking all results together, the following conclusions can be drawn. Firstly, no long-term relationships exist between the national investment- and saving-rates of the EU-countries but the observable correlations are the result of spurious correlations between trending variables. The analysis of the short-term relations and the subsequent examination for structural breaks suggest secondly, that also in this case a high degree of capital mobility is present, that frequently increases in the course of time.

Economic integration alters the growth path of the involved economies through scale, factor reallocation and factor trade effects. Scale effects arising from positive spillovers are best known from literature. Provided that the growth mechanism in autarky is the more efficient the larger is the economy, integration increases the relevant scale of an economy which unambiguously fosters growth. However, if spillovers are not intensive enough or if they arise from an average value of the capital stock, long-term growth remains unaffected by trade. Furthermore, integration leads to a reallocation of factors between sectors. If trade causes a reallocation of inputs from dynamic sectors to other sectors, the growth rate decreases. This can happen in the case of integration with countries being rich in the factor that is extensively used in the dynamic sectors, assuming a low substitutability of inputs in production. If all sectors contribute to the dynamics of an economy, the probability of negative factor reallocation effects becomes lower. Factor trade between the economies can reinforce differences in the countries' growth rates leading to growth centers in an integrated economic area. The present paper demonstrates these mechanisms in an integrated approach providing a compact survey of the recent literature on trade and growth.

An analysis of European employment deficits using employment-population ratios shows that there exist unexhausted employment potentials in many EU countries, in particular for older employees, but also for women and in the service sector. If the EU-15 were to match the U.S. employment-population ratio, an additional 34 million people could be in work. The new EU target employment-population ratio of 7 0 percent would imply the creation of 2 3 million jobs, which also seems ambitious. While some EU members have reached this target, employment- population ratios vary considerably between EU countries, so that an uniform EU employment policy is not advisable.

Zusammenfassung Die Liberalisierung der Telekommunikation in den EU-Ländern hat zu einer erheblichen Verbilligung der Auslandstelefongespräche und damit zu einem erhöhten internationalen Kommunikationsvolumen geführt. Es stellt sich daher die Frage nach dem Einfluß der internationalen Telekommunikation: Sinkende internationale Informations- und Transaktionskosten stimulieren den Wettbewerb und erweitern zugleich den räumlichen Absatzradius von handelbaren Gütern und Dienstleistungen, so daß Handelsschaffungseffekte der internationalen Telekommunikation zu erwarten sind. Auf Basis eines modifizierten Gravitationsansatzes, bei dem das internationale Telekommunikationsvolumen als erklärende Variable erstmals einbezogen wird, zeigt sich ein empirisch signifikanter Einfluß der Telekommunikationsvariable auf den Außenhandel; die Koeffizienten für die Sozialproduktsvariable im Liefer- bzw. Destinationsland sind kleiner als in traditionellen Analysen. Aus wirtschaftspolitischer Sicht kommt daher dem weiteren Ausbau und der Modernisierung der Telekommunikation - bei verschärftem Wettbewerb - eine erhebliche ökonomische Rolle zu: Die Integration dürfte weiter steigen. Keywords The liberalization of telecommunications has contributed to considerable price reductions in international telephony and to rising volumes of telecommunications. This raises the issue of the economic impact of international telephony. Falling international information and transaction costs should stimulate competition and enlarge the market radius for producers in the tradables sector - this lets us to expect trade creation effects of international telecommunications. Based on a modified gravity equation which is taking into account the role of international telecommunication volumes we show that international telephony has a significant positive impact on trade volume; at the same time the coefficients of the traditional variables, GDP in the exporting and the importing country, are smaller than in traditional approaches. Thus from a policy perspective the modernization and growth of the international telecommunications network - within a system of enhanced competition - is crucial for Europe: economic integration will be reinforced.

This paper studies the effects of a further integration of markets that are characterized by intra-industry trade. The analysis is motivated by the observation that product markets of EU countries are more segmented than is usually supposed, which becomes evident e.g. from high differences in prices for identical products. We consider a duopoly model with a home bias in demand that creates an incentive for price discrimination. The effects of reducing trade barriers depend on whether primarily trade costs born by exporting firms decrease or whether arbitrage is enhanced. A fall in arbitrage costs raises the export price, lowers the volume of trade and may result in a reduction of total quantity. Decreasing trade costs reduce prices and expand intra-industry trade; however, the exact effects depend on whether arbitrage constitutes a binding restriction for setting prices. Finally, even measures that equally reduce trade and arbitrage costs may lower the volume of trade.

Public finances in Europe are relevant both with respect to their fiscal and their possible integration- promoting function. However, decisions on the expenditures and revenues of the European Community create a permanent potential of conflicts between the EU countries. Furthermore, with the Maastricht Treaty, additional restrictions for national budgetary policies have come into existence. If the present structure of EU expenditures is measured by the criteria of welfare economics as well as of the Public Choice School, it would be desirable to transfer most EU responsibilities back to the national level. Instead, the EU should concentrate on the provision of EU-wide public goods and on the internalisation of border-crossing external effects. Contrary to this, the existing revenue system of the EU - representing de facto a system of fiscal contributions from the member countries - seems to be quite appropriate also for the foreseeable future both from a welfare economic and from a politico-economic point of view. Also in the field of taxation, a regulated tax competition should be preferred to a far-reaching tax harmonisation. This applies particularly taking into consideration the changed framework of incentives created by the European Economic and Monetary Union created in 1999.