A dynamic economic and monetary union

In response to the European debt crisis and associated deep recession, a
number of important steps have recently been taken towards redesigning
the institutional architecture of EMU, based on the roadmap outlined in
the Van Rompuy Report (2012). But these institutional innovations – in
particular the ‘fiscal compact’, the ESM, the SSM and the SRM – retain
relatively weak theoretical foundations. In particular, there is a
noticeable gap between policy-oriented analyses of the precise EU
challenges, and the major developments in dynamic macroeconomic theory
of the past three decades.
ADEMU brings together eight research
groups from leading European institutions with the aim of closing this
gap. It studies the overall monetary and fiscal structure of the EU and
the euro area, and the mechanisms of fiscal policy coordination among
member states, with specific focus on: i) ensuring the long-term
sustainability of EMU, addressing issues such as debt overhang, fiscal
consolidation, public debt management, risk-sharing within the union,
and crisis management mechanisms; ii) building resilience to economic
shocks, with special emphasis on the coordination of fiscal policies,
fiscal multipliers and labor market risks; and iii) managing
interdependence in the euro area, analyzing both fiscal and financial
spillovers and the effects of macroeconomic imbalances on financial and
money markets, and, to confront these issues, new forms of banking
regulation and monetary policy.
ADEMU is at the frontier of dynamic
macroeconomic research, and the project will generate new knowledge that
will be used to provide a rigorous assessment of the current
institutional framework, and detailed proposals for improving it. It
will also be a focal point in debates among academics, policymakers and
other stakeholders regarding the implementation of new policies. The
scope of the project will include a full consideration of political
economy and legal dimensions to alternative institutional reforms.