ABSTRACT
Despite the fact that economic analysis cannot alone fully grasp a subject such as economic and monetary union (EMU), which was so eminently political, nevertheless it still remains indispensable to its study. This chapter describes the various aspects and implications of monetary union, although some of the linkages between the latter and economic union will be pointed out. It defines economic union as the end-stage of a process of integration, in which the main policy-making decisions about economic objectives like full employment, stability of prices and growth are taken at the central as opposed to the regional level. In the context of the European Communities, some economists have argued that a complete integration of capital markets would provide a long-lasting solution to problems arising from regional imbalances. When markets become unified, then the convertibility of a country's currency is extended into long-term securities. Economic interdependence manifests itself in both product and factor markets.
