The firm-level effects of European monetary unification

Authors: Barrett C.B.¹; Turongpun W.¹

Source: Managerial Finance, Volume 25, Number 11, 1999 , pp. 35-42(8)

Publisher: Emerald Group Publishing Limited

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Abstract:

Considers the likely microeconomic effects of European Monetary Union (EMU) and the European Central Bank (ECB), i.e. impact on firm-level incentives and performance. Believes that firms’ uncertainty will be reduced by “a more stable and prudent macroeconomic environment”, and that a strong euro will lead to lower interest rates, reduced transaction costs, the elimination of exchange rate risk within the EMU and therefore increased output, investment and competition. Accepts that firms may find transition costs expensive and that opportunities for fraud and errors will increase in the transition period. Identifies the sectors and types of firm most likely to benefit in the short term and recognizes the possibility of longer term problems which may reverse the competitive advantages.

Keywords: EMU; Microeconomics; Costs; Company performance; Competitive strategy

Language: English

Document Type: Miscellaneous

Affiliations: 1: Cornell University, Ithaca, New York, USA

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