The Political Economy of European Monetary Convergence, 1972-1998
Thomas Schaeubli, Swiss Federal Institute of Technology Zurich
States take two, not one decision when joining monetary systems. They can at any time choose two of the following strategies: monetary autonomy, capital mobility, and fixed exchange-rates. The established theories on European monetary integration give unequal relevance to capital mobility, at best treating it as a background condition. This paper proposes that capital mobility is a political choice rather than a technical inevitability. It argues that the interesting divide in European politics is the one between monetary autonomy and monetary convergence, the latter defined as the combination of fixed exchange-rates and capital mobility. The paper identifies and tests potential explanations for monetary convergence and explores the past and future roles of the concept in European and international monetary politics.