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Narratives of Optimum Currency Area Theory and Eurozone Governance

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  • Holly Snaith

Abstract

Optimum Currency Area theory (OCA) is a body of research that has, since its inception in 1961, been highly influential for the discourse and design of Economic and Monetary Union, exercising a significant hermeneutical force. Nonetheless, there has been little acknowledgement that OCA is the subject of very significant internal disagreement, to the extent that economists writing within the field do not commonly agree upon the ontological foundations of the theory. This entails that the translation of the theory into political reality has been characterised by a series of often mutually contradictory narratives, which build upon schisms in the academic corpus. The political realisation of this can be seen during the negotiations over the 1992 process, where certain aspects of the theory concerning governance (of fiscal policy and preferences for conflict adjudication) have been notably suppressed, capitalising upon the fundamental uncertainty in the theory itself. The final part of the paper goes on to consider the financial crisis, and how OCA theory might aid policy-makers' attempts to induce ex-post convergence, demonstrating the continued relevance of the theory.

Suggested Citation

  • Holly Snaith, 2014. "Narratives of Optimum Currency Area Theory and Eurozone Governance," New Political Economy, Taylor & Francis Journals, vol. 19(2), pages 183-200, March.
  • Handle: RePEc:taf:cnpexx:v:19:y:2014:i:2:p:183-200
    DOI: 10.1080/13563467.2013.779653
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    1. Reinhart, Carmen, 2008. "Eight Hundred Years of Financial Folly," MPRA Paper 11864, University Library of Munich, Germany.
    2. Dyson, Kenneth, 2000. "The Politics of the Euro-Zone: Stability or Breakdown?," OUP Catalogue, Oxford University Press, number 9780199241644.
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    2. Jesús Ferreiro & Catalina Gálvez & Carmen Gómez & Ana González, 2017. "Economic Crisis and Convergence in the Eurozone Countries," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 64(2), pages 223-244, March.
    3. Alexoaei Alina Petronela & Robu Raluca Georgiana, 2018. "A theoretical review on the structural convergence issue and the relation to economic development in integration areas," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 12(1), pages 34-44, May.

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