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It Can't Happen, It's a Bad Idea, It Won't Last: U.S. Economists on the EMU and the Euro, 1989-2002

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Author Info

  • Lars Jonung
  • Eoin Drea

Abstract

On the whole, the euro has, thus far, gone much better than many U.S. economists had predicted. We survey how U.S. economists viewed European monetary unification from the publication of the Delors Report in 1989 to the introduction of euro notes and coins in January 2002. U.S. academic economists concentrated on whether a single currency was a good or bad thing, usually using the theory of optimum currency areas, and most were skeptical towards the single currency. In contrast, Federal Reserve economists had a less analytical and a more pragmatic approach. Both groups adjusted their views as European monetary unification progressed. It is surprising that academic economists, living in and benefiting from the U.S. monetary union, were so skeptical of monetary unification in Europe. We explain the skepticism as resulting from the strong influence of the original theory of optimum currency areas; failure to see monetary unification as an evolutionary process; failure to identify pegged exchange rates, rather than floating rates, as the practical alternative to a single European currency; and the belief that the single currency for Europe was primarily a political project that ignored economic fundamentals.

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Bibliographic Info

Article provided by Econ Journal Watch in its journal Econ Journal Watch.

Volume (Year): 7 (2010)
Issue (Month): 1 (January)
Pages: 4-52

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Handle: RePEc:ejw:journl:v:7:y:2010:i:1:p:4-52

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Related research

Keywords: Euro; optimum currency area; European Central Bank (ECB); Economic and Monetary Union (EMU); Federal Reserve System; monetary unification; Europe; United States;

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Blog mentions

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  1. La trahison des clercs: ROARS vs lavoce.info
    by Alberto Bagnai in Goofynomics on 2014-07-08 09:04:00
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Cited by:
  1. Fritz W. Scharpf, 2011. "Monetary Union, Fiscal Crisis and the Preemption of Democracy," Europe in Question Discussion Paper Series of the London School of Economics (LEQs) 6, London School of Economics / European Institute.
  2. Michael D. Bordo & Agnieszka Markiewicz & Lars Jonung, 2011. "A Fiscal Union for the Euro: Some Lessons from History," NBER Working Papers 17380, National Bureau of Economic Research, Inc.
  3. Andr´┐Ż Sapir, 2011. "European Integration at the Crossroads: A Review Essay on the 50th Anniversary of Bela Balassa's Theory of Economic Integration," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 1200-1229, December.
  4. Mario Sarcinelli, 2013. "L'unione bancaria europea e la stabilizzazione dell'Eurozona," Moneta e Credito, Economia civile, vol. 66(261), pages 7-42.
  5. Scharpf, Fritz W., 2011. "Monetary union, fiscal crisis and the preemption of democracy," MPIfG Discussion Paper 11/11, Max Planck Institute for the Study of Societies.

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