Despite the progression towards the formation of European Monetary Union there still exists considerable disagreement between economists about the relative merits of the current European Monetary System (EMS), EMU and a return to independent policy under floating exchange rates. This book is designed to contribute to this debate on monetary union in Europe by using large scale macroeconomic models of the world economy, including the OECD Interlink model and the widely used NiGEM model, to evaluate the EMU, the EMS and the floating exchange rate policies. Various modelling groups address the issues facing Europe and the implications for policy analysis. The book illustrates some of the findings of studies which have evaluated the EMS and EMU and highlights the critical features which influence the different findings. In particular, it analyses the possible changes in wage bargaining under transition to EMU and the implications of these. The wider policy issues facing the European economies are discussed. Theoretically based analyses such as the nature of credibility and the role of exchange rate realignments are included. The objective of the book is to show that the path to monetary union is possible, but that care has to be taken with the design of policies along that path.