EU Policies and Policy Institutions

Part I (8 classes)

Prof. Pietro Reichlin


Office: Room 524, LUISS, Viale Romania 32

Office Hours: Wednesday, 15:00-17:00

Course Description.

The aim of the course is to provide a basic understanding of the architecture of the European Institutions presiding over monetary and fiscal policies. Part I is devoted to a brief introduction to the institutional architecture of the European Monetary Union, a brief historical account of the main developments leading to the launch of the EMU and a review of the essential macroeconomic tools for understanding exchange rate regimes, monetary integration and the benefits and costs of monetary unions.

Primary Reference

  • Baldwin, C. Wyplosz, The Economics of European Integration, 5th ed. McGraw Hill, 2015. Parts I, IV and V. [BW]

Additional Materials.

  • Slides provided by the instructor.
  • Beetsma and M. Giuliodori, “The Macroeconomic Costs and Benefits of the EMU and Other Monetary Unions: An Overview of Recent Research”, Journal of Economic Literature, 48, 2010.
  • Bordo and H. James, “The European Crisis in the Context of the history of previous financial crisis”, NBER W.P. 19112, 2013.
  • De Grauwe, Europe Monetary Union, The New Palgrave Dictionary of Economics, in Steven N. Durlauf and Lawrence E. Blume (eds), Online Edition, 2011.
  • ECB Economic Bulletin, Issue 6/2017.
  • Issing, “Europe’s Hard Fix: The Euro Area”, speech at the Workshop on “Regional and International Currency Arrangements”, Vienna, 24 February 2006.
  • J-C. Juncker, D. Tusk, J. Dijsselbloem, M. Draghi and M. Schulz, “Completing Europe’s Economic and Monetary Union”, (the Five Presidents’ Report), European Commission, 2017.
  • Regling, “European Integration and the ESM”, Speech at Sciences Po, Paris School of International Affairs and School of Public Affairs, 2017.
  • Scheller, “The European Central Bank, History, Role and Functions”, ECB, 2006.

Other materials can be suggested during the course.


Extended Course Plan & Lecture-Specific References

*Lecture Duration: 2 hours

Lecture 1 Topic A brief account of the architecture and genesis of the European Monetary Union.
References BW, Part I.
Lecture 2 Topic Essential macroeconomic tools – The closed economy. Accounting identities, effects of macroeconomic shocks, the impact of fiscal policy, monetary policy instruments and objectives. Debt growth and stabilization.
References BW, Part IV. Ch. 13.
Lecture 3 Topic Essential macroeconomic tools – The open economy. Accounting identities, nominal and real exchange rates, the balance of payment, macroeconomic effects of exchange rate variations.
References BW, Part IV. Ch. 13.
Lecture 4 Topic Essential macroeconomic tools – The open economy. Monetary and fiscal policies in open economies, exchange rate risk, the impossible trinity principle.
References BW, Part IV. Ch. 13.
Lecture 5 Topic Spillovers and asymmetric shocks in a two-country world economy. Sluggish price flexibility, external and internal adjustments.
References BW, Part IV. Ch. 13.
Lecture 6 Topic Comparing exchange rate regimes in the short and long run. Costs and benefits of flexible and fixed exchange rate regimes. Nominal vs. real exchange rate in the long run. Interest rate spreads and speculative attacks.
References BW, Part IV. Ch. 13.
Lecture 7 Topic Rules vs. discretion. The advantage of an independent monetary authority. From fixed exchange rates to monetary unions. Some reflections on the per-euro and post-euro experience. Fixed exchange rate regimes and Monetary Unions.
References BW, Part IV. Ch. 13.
Lecture 8 Topic Applying theory to history. The Gold standard, Bretton Woods, the EMS and the EMU.
References BW, Part IV. Ch. 14.



  1. O. Issing, Europe’s Hard Fix: The Euro Area
  2. Grauwe, The European Monetary Union
  3. BORDO and JAMES, The EU crisis in the context of history
  4. Scheller, EU integration and the ESMThe ECB: history, role, functions
  5. 5 Presidents Report
  6. Regling, EU integration and the ESM


  1. Framework, Some History
  2. Essential Macroeconomic Tools: The Closed Economy
  3. Essential Macroeconomic Tools: The Open Economy
  4. Comparing Exchange Rate Regimes
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