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Updated A.Y. 2020-2021

Master of Science in European Economy & Business Law

Economics of European Integration 


Academic Year 2020-2021


Lecturer: Prof. Barbara Annicchiarico

E-mail address: barbara.annicchiarico@uniroma2.it

E-mail policy: See here

Office Hour: I haven't an open-door policy. Please respect office hours. Check here

Credits - CFU: 6

Teams link: click here

Syllabus Updates and Material: Students are advised to regularly check for syllabus updates. Handouts and presentations will be available in due course.

Description of the Course

The course introduces students to the economics analysis of the European Monetary Union. The course will cover economic concepts, models and tools developed in the field of international economics and macroeconomics that are particularly suited to provide students with a better understanding of the process of monetary integration.


Students are expected to be familiar with basic microeconomic and macroeconomic concepts and models, and with elements of game theory.  A quantitative background is not strictly required, but students will benefit from knowledge of mathematics and statistics. The course is held in English

Learning outcomes

Deep understanding of the functioning of the monetary markets  in closed and in open economy; knowledge of the determinants of exchange rates and of currency crisis models; understanding the theory of optimum currency areas, and costs and the benefits of monetary unions;  comprehension of the transition process towards a monetary union and of the fragility of incomplete monetary unions; in-depth understanding of the role of the ECB,  and of the role of the euro in international markets; comprehension  of the economic implications of the rules and treaties governing the economic functioning of the EMU and of the related implications for the conduct of monetary and fiscal policies (euro crisis, fiscal rules, sovereign debt crisis); understanding the importance of reforms to complete the monetary union.

Learning of an analytical and quantitative approach for economic analysis  so to strengthen what already learned during the first cycle and be able to apply these tools in an innovative way, also in research contexts. 

Knowledge and understanding

To give students familiarity with a broad range of European monetary and fiscal policy issues; to ensure a good knowledge of the economic grounding of the European monetary integration and of the related fragilities; to show students the usefulness of simple analytical models in understanding the relevant aspects of European integration and to give them the ability to apply these analytical tools intelligently. 

Applying knowledge and understanding

What is learned can be applied to other situations and to actual work in the context of European  institutions and/or national and local public administrations subject to European directives and regulations.

Making judgements 

What is learned can be used to assess critically and without prejudices: i) the activity and the decisions of national and European policymakers; ii) the reforms on the agenda. Students will be able to understand novel and complex problems related to the process of economic integration and speculate on future evolutions of the EMU.

Communication skills

Be able to rigorously present facts and complex mechanisms; learn how to present complex facts and economic mechanisms in a comprehensive manner and communicate the relative conclusions, knowledge and rationale to specialists and non-specialized audiences. 

Learning skill

The course aims at providing students with the tools necessary for future learning. At the end of the course students are expected to be able to read and understand official documents, scientific articles and databases. Students are also expected to be develop autonomous learning abilities.  
Special attention will be given to help students develop their soft skills, such as flexibility, integrity and work ethic, positive attitude, responsibility, teamwork and interpersonal skills.

Teaching method

Online lectures, but students will be asked to participate actively. During the course I will sometimes use Matlab to show some stylized facts. Simple codes will be provided for replication.


Written and oral examination on all programme. Different rules apply whether the exam will be held in presence or in remote. See the exam rules page or Presentation #0. Teams link for exams.

Grading Policy

Please note that a grade of 30/30 represents achievement that is outstanding relative to the level necessary to meet course requirements (students must show an excellent knowledge of the subject, all written work must be well written, competent and accurate; sloppiness of any kind will prevent a student from getting 30/30 as final grade, no matter if the student feels she/he is well prepared). Bargaining on grading is not allowed. Notice that grading is based on performance rather than effort. If you are not happy with the grade, just improve the performance. It is not possible to submit extra work in the attempt to improve a grade. 


Zero tolerance for academic dishonesty

Academic dishonesty includes cheating on exams, plagiarism, improper citation, recycled work, unauthorized assistance, or similar actions. Assignments and projects are specific to individual courses; presenting the same work in two different courses (including previous courses) is considered recycling and is unacceptable.

Students who commit an act of academic dishonesty will receive a failing grade. See also the Exam Rules.

Attedance and Behavior

  • Attendance is not mandatory, but highly recommended. Attending students are typically able to reap more benefits from the course and more easily meet the learning objectives.

  • Punctuality is mandatory, even if the course will be held online.




Last update:  19th October 2020 

IMPORTANT: This syllabus will be subject to changes and updates during the course. The final reading list for each topic will be available step by step. In this way I'll be able to tailor the contents of this course to students' needs, interests and background. Please check this syllabus on a regular basis for any updates.


Please notice that

  • Starred (*) readings are required

  • Other readings are optional and are provided for your interest and benefit.

1. Basic Maths and Macroeconomic Tools

  • Logarithms, log-linearization, differential equations and difference equations
  • Money demand and supply 
  • Expectations
  • Open Economy Aspects

    • Interest rate parity

    • PPP

    • The impossible trinity

    • Marshall-Lerner Condition

    • J-Curve

Final Readings

  • Logarithms, log-linearization, differential equations and difference equations
    • *Presentation #1
  • Money demand and supply 

    • *Presentation #2
    • BAG-2017: chapter 4* (only sections 4.1, 4.2, 4.3)

  • Expectations
    • *Presentation #3
  • Open Economy Aspects

    • *BW-2019: chapter 13 + Annex on various exchange rate regimes

    • *Presentation #4

    • *Presentation #5

    • Kenneth Rogoff (1996) The Purchasing Power Parity Puzzle, Journal of Economic Literature, Vol. 34, No. 2. pp. 647-668.

    • Maurice Obstfeld, Jay C. Shambaugh & Alan M. Taylor (2005). "The Trilemma in History: Tradeoffs Among Exchange Rates, Monetary Policies, and Capital Mobility" in The Review of Economics and Statistics, Vol. 87, No. 3, pp. 423--438.

2. Exchange Rates Determinants and the Euro/Dollar Exchange Rate

  • Flexible-price monetary model with and without risk premium

  • The Euro/Dollar exchange rate

Final Readings

  • *Presentations 6-7-8

3. Macroeconomics of Monetary Integration

  • Facts of monetary integration

    • Bretton woods

    • Europe's snake

    • The European Monetary System

    • The crisis of 1992-1993

    • Maastricht Treaty

  • Optimum currency area (OCA) theory

    • the OCA criteria
    • Is Europe an OCA?

    • Productivity and inflation in a monetary union: the Balassa-Samuelson effect

Final Readings

  • Facts of monetary integration

    • * A history of European monetary integration

    • *Presentation #9

    • *BW-2019: chapter 14 
    • *Maurice Obstfeld (1996) Models of Currency Crises with Self-Fulfilling Features, European Economic Review, vol. 40, pp. 1037-1047, ONLY sections 1*, 2*
  • Optimum currency area (OCA) theory
    • *Presentation #10

    • *BW-2019: chapter 15

    • *Paul Krugman (2012) "The revenge of optimum currency area", Chapter in NBER book NBER Macroeconomics Annual 2012, Volume 27 (2013).

    • Kenen, P. (1969) "The Theory of Optimum Currency Areas: An Eclectic View" in R.Mundell and A. Swoboda eds, Monetary Problems of the International Economy, The University of Chicago Press.

    • Mundell, R. (1961) A theory of Optimum Currency Areas, American Economic Review, 51 (4).

4. European Monetary Union - The Transition to the EMU

  • The transition to a monetary union

  • The 5 entry conditions (Maastricht Criteria): Why convergence requirements?

  • How to fix the conversion rates

  • Inflation and productivty in a monetary union - the Balassa-Samuelson effect

Final Readings

  • *BW-2019: chapter 16: section 16.1* and 16.2*
  • *Presentations #11, #12 and  #13 

  • *DG-2020: chapter and 6

5. European Monetary Union - Function and Fragilities

  • The fragility of incomplete monetary unions

Final Readings

  • *Presentations #14 and #15

  • *BW-2019: chapter 16: sections from 16.3* to 16.7*

  • *ECB website contents (see the links in The functioning of the Eurosystem).  All the material MUST be covered* (this is summarized in Presentation 14)

  • *DG-2020: chapter 5

  • * The transmission mechanism of monetary policy - The Monetary Policy Committee - Bank of England

6. Fiscal Policy

  • The Government Budget Constraint

  • Fiscal and monetary policy interactions

  • Fiscal policy in a monetary union

  • Fiscal policy externalities

  • Stability and Growth Pact

  • Fiscal Compact

Final Readings

  • *BW-2019: chapter 17

  • *DG-2018: chapter 11

  • *Presentations #16 and # 17

  • *Barry Eichengreen & Charles Wyplosz, 1998. "The Stability Pact: more than a minor nuisance?," Economic Policy, CEPR & CES & MSH, vol. 13(26), pages 65-113, 04.

  • ECB on the Fiscal Compact see here

  • Thomas J. Sargent & Neil Wallace (1981) Some Unpleasant Monetarist Arithmetic, Federal Reserve Bank of Minneapolis Quarterly Review vol. 5, no 3.

  • Buiter, W.H. & Corsetti, G. & Roubini, N., 1992. Excessive Deficits: Sense and Nonsence in the Treaty of Maastricht, available here.

  • M. Wickens (2008), Macroeconomic Theory, Princenton University Press, chapter 5.

6. Eurozone Crisis

  • Bubbles 
  • The subprimes follies and the great recession

  • Sovreign Debt Crisis 

  • Managing the Crisis and the EMS

  • Lessons from the crisis: How to complete the monetary union and conditions for the survival of the Euro

Final Readings 

  • *Presentations #18-22

  • *BW-2019: chapter 19

7.  Current and future prospects

  • Black Swan scenarios
  • Current and future challenges

Final Readings 


  • BW-2019: Baldwin, Richard and Wyplosz, Charles (2019), The Economics of European Integration, 6th edition, McGraw Hill. This book represents an ESSENTIAL READING for this course.

  • DG-2020: De Grauwe Paul (2020), The Economics of Monetary Union, 13th edition, Oxford University Press. This book represents an ESSENTIAL READING for this course.

  • BAG-2017: Blanchard, O., Amighini A., Giavazzi F., (2017), Macroeconomics, A European Perspective, 3rd edition, Pearson.