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The Euro: A "MUST" for small European states?

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  • Ohr, Renate
  • Özalbayrak, Mehmet

Abstract

This paper deals with the question of what impact membership of the European Monetary Union (EMU) has had on small European states. We will also analyze whether or to what extent a large number of small member states affect the EMU itself when they vastly outnumber the large countries. We conclude that the small countries in the European Union are far from creating a homogeneous group. They differ in the length of EU membership, income per capita, membership and non-membership of the EMU, production structure, foreign trade policy, and stability readiness. However, they do share some characteristics, particularly their relatively high openness, through which domestic macroeconomic variables are easily influenced by external shocks. The welfare gains of a small country joining the eurozone depend on the extent to which the benefits (if existent) of higher financial credibility outweigh the loss of autonomous monetary policy. Finally, with regard to their significance in the EMU, in no case should cutbacks be made for small countries concerning the stability requirements.

Suggested Citation

  • Ohr, Renate & Özalbayrak, Mehmet, 2012. "The Euro: A "MUST" for small European states?," University of Göttingen Working Papers in Economics 131, University of Goettingen, Department of Economics.
    • Handle: RePEc:zbw:cegedp:131
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    2. König, Jörg & Ohr, Renate, 2012. "Messung ökonomischer Integration in der Europäischen Union: Entwicklung eines EU-Integrationsindexes," University of Göttingen Working Papers in Economics 135, University of Goettingen, Department of Economics.

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    More about this item

    Keywords

    Euro; European Monetary Union; economic integration; small open economy;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F15 - International Economics - - Trade - - - Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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