Currency Unions: Some Lessons from the Euro-Zone
AbstractWhilst there are many sizeable benefits from currency union, the main disadvantage is often the difficulty of adjusting to an asymmetric shock. Such adjustment is easier when the separate countries (regions) in such a union have flexible labour markets, and when there is a federal fiscal system to ease the adjustment process. The euro-zone has neither. We show that the trends in relative unit labour costs have in several recent cases been worsening relative competitiveness, thereby putting the euro-zone under greater centrifugal pressure. Nevertheless the costs of ‘exit’ are so high that it would only probably occur as a consequence of political mis-calculation. Copyright International Atlantic Economic Society 2007
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Bibliographic InfoArticle provided by International Atlantic Economic Society in its journal Atlantic Economic Journal.
Volume (Year): 35 (2007)
Issue (Month): 1 (March)
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More information through EDIRC
currency union; asymmetric shock; euro-zone; relative unit labour costs; exit costs; F33; F36;
Find related papers by JEL classification:
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
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- Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
- Charles Goodhart, 2006. "Replacing the Stability and Growth Pact?," Atlantic Economic Journal, International Atlantic Economic Society, vol. 34(3), pages 243-259, September.
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