Implications of EMU Enlargement for European Monetary Policy: A Political Economy View

In this paper we investigate the implications of EMU enlargement from a political economy perspective. We argue that a high degree of convergence of the candidate countries prior to EMU accession is an important requisite. Otherwise, as a result of a sharp increase in economic dispersion, public support for European monetary policy is likely to decrease, and external pressure on the European Central Bank will mount. (JEL E 58, E 50, D 78