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The optimum currency area theory and the EMU

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  • Jennifer Jager
  • Kurt Hafner

Abstract

The eurozone crisis has revealed certain shortcomings of the EMU, such as its vulnerability to asymmetric shocks and its inability to act as predicted by the theory of optimum currency areas. Although the share of intra-EU trade has increased since the introduction of the euro, dissimilarities in economic structure combined with high degrees of industrial specialisation have increased the EMU’s vulnerability to asymmetric shocks. Moreover, the lack of labour mobility or a transfer payment system limits the EMU’s crisis adjustment capabilities. However, most of the implemented and proposed stabilisation measures seek to remedy this vulnerability by promoting economic integration, further fiscal discipline and debt redemption. Copyright ZBW and Springer-Verlag Berlin Heidelberg 2013

Suggested Citation

  • Jennifer Jager & Kurt Hafner, 2013. "The optimum currency area theory and the EMU," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 48(5), pages 315-322, September.
    • Handle: RePEc:spr:intere:v:48:y:2013:i:5:p:315-322
    DOI: 10.1007/s10272-013-0474-7
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    Cited by:

    1. António Afonso & José Alves & Krzysztof Beck, 2022. "Pay and unemployment determinants of migration flows in the European Union," Working Papers REM 2022/0251, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    2. Nikolaos Stoupos & Apostolos Kiohos, 2022. "Euro Area: Towards a European Common Bond? – Empirical Evidence from the Sovereign Debt Markets," Journal of Common Market Studies, Wiley Blackwell, vol. 60(4), pages 1019-1046, July.
    3. Mirdala, Rajmund & Ruščáková, Anna, 2015. "On Origins and Implications of the Sovereign Debt Crisis in the Euro Area," MPRA Paper 68859, University Library of Munich, Germany.
    4. István Benczes & Balázs Szent-Iványi, 2016. "Rising Hopes in the European Economy Amidst Global Uncertainties," Journal of Common Market Studies, Wiley Blackwell, vol. 54, pages 167-184, September.
    5. Anna Ruščáková & Jozefína Semančíková, 2016. "European Debt Crisis: Theoretical And Empirical Investigation Of External Imbalances As One Of Its Main Causes," Poslovna izvrsnost/Business Excellence, Faculty of Economics and Business, University of Zagreb, vol. 10(2), pages 191-207.
    6. Liargovas Panagiotis & Arvanitis Argyrios, 2023. "Inflation Differentials of Euro Countries and Their Determinants," Economies, MDPI, vol. 11(10), pages 1-16, October.
    7. van Riet, Ad, 2015. "Market-preserving fiscal federalism in the European Monetary Union," MPRA Paper 77772, University Library of Munich, Germany.

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