This textbook on monetary integration has been fully revised and updated to provide analysis of the costs and benefits of monetary union in Europe. The author has rewritten and expanded the chapters on the rise and fall of the European Monetary System, and the text and empirical evidence cover the whole of the important events of 1993. The author has also presented theoretical arguments which have arisen since the first edition was written. Professor De Grauwe focuses on the economic theory of monetary unions, and analyzes the operation of systems in which national monetary authorities retain their individual currencies but agree to fix their exchange rates. The author examines whether there is a good economic case for countries to have separate currencies, and the economic costs and benefits of moving to a single currency. He provides a summary of the working of this system in Europe, until the events of 1992-3, and offers a critical analysis of the possibility of transition to a full monetary system.