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Optimal Currency Area Revisited

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  • Yves Mersch

Abstract

Several euro area member states are under increased market scrutiny although public finances in the euro area as a bloc are in a much better shape than in the US or Japan. The main reason is that the euro area is an alliance of sovereign countries with most of the relevant political decisions - including public finance - being taken by national governments whereas the other major currencies are sovereign states with central governments and budgets. In the absence of a central government and an internal nominal exchange rate, effective rules are required to safeguard the stability of a currency area. The current crisis has disclosed the weaknesses of the institutional set up of the euro area. Europe has already undertaken major steps to tackle these. Challenges remain, however, to further proceed in the direction of an Optimum Currency Area.

Suggested Citation

  • Yves Mersch, 2011. "Optimal Currency Area Revisited," RSCAS Working Papers 2011/01, European University Institute.
    • Handle: RePEc:rsc:rsceui:2011/01
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    Cited by:

    1. Ulrich Volz, 2013. "Lessons of the European crisis for regional monetary and financial integration in East Asia," Asia Europe Journal, Springer, vol. 11(4), pages 355-376, December.

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