Monetary Union

The Maastricht road to a monetary union: 1989-99
Indirect benefits of the European Monetary Union
Benefits relating to price stability. Price stability provides an efficient allocation of resources. A low inflation rate is associated with a low variability of inflation. This fact has two macroeconomic consequences, both of which have a positive impact on long-run output.
First, low variability of inflation reduces the problem entrepreneurs face, in order to make the correct production and investment decisions, in
distinguishing between absolute price changes and relative price changes in an inflationery environment. The Economic and Monetaryy Union section of the Maastricht Treaty appears primarily in Title 2, Articles 102A to 109m, and in some eleven Protocols and six Declarations. Table 4.1 indicates the applicability of each article to the three stages of the EMU. This proposed union is one of the major objectives of the Maastricht Treaty, involving not only the
introduction of a single currency, but also the transfer of monetary powers away from
national authorities to a newly created European central bank.…