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The regional impact of the single currency

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  • Martin Hallet

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    Abstract

    The essential feature of a monetary union is the irrevocable fixing of nominal exchange rates of participating countries? currencies. Regions, as sub-units of Member States, will not be directly affected by such a decision since they have - by definition - no access to nominal exchange rate changes or monetary policy which in any case should never have been instruments for economic stabilisation at the regional level. Indirectly, however, the reduction of transaction costs as provided by the euro will give all regions of participating countries better access to the Single Market and will affect regions? competitiveness. To the extent that transaction costs between previously different currency areas cease to exist within a single currency area, integration effects occur on goods, capital and labour markets. The so-called "New Economic Geography" gives some indications on the impact of integration on trade and investment, whereas integration effects on the labour market should be marginal. The impact will vary more between regions of different Member States rather than between specific types of regions. Regions in the small, open peripheral Member States participating in EMU are likely to have relatively greater integration effects than regions in the core Member States whose exchange rates with main economic partners have already been stable for a long time.

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    File URL: http://www-sre.wu-wien.ac.at/ersa/ersaconfs/ersa98/papers/27.pdf
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    Bibliographic Info

    Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa98p27.

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    Date of creation: Aug 1998
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    Handle: RePEc:wiw:wiwrsa:ersa98p27

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    1. Maurice Obstfeld & Giovanni Peri, 1998. "Regional non-adjustment and fiscal policy," Economic Policy, CEPR & CES & MSH, vol. 13(26), pages 205-259, 04.
    2. Diego Puga, 1996. "The rise and fall of regional inequalities," LSE Research Online Documents on Economics 20643, London School of Economics and Political Science, LSE Library.
    3. Gustav A. Horn, 1992. "On Regional Convergence in a Transitional Economy: The Roles of Migration and Wages," Discussion Papers of DIW Berlin 62, DIW Berlin, German Institute for Economic Research.
    4. Krugman, Paul & Venables, Anthony J., 1994. "Globalization and the Inequality of Nations," CEPR Discussion Papers 1015, C.E.P.R. Discussion Papers.
    5. 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.
    6. Krugman, Paul & Venables, Anthony J., 1990. "Integration and the Competitiveness of Peripheral Industry," CEPR Discussion Papers 363, C.E.P.R. Discussion Papers.
    7. Torres,Francisco & Giavazzi,Francesco (ed.), 1993. "Adjustment and Growth in the European Monetary Union," Cambridge Books, Cambridge University Press, number 9780521440196, October.
    8. Sergio Nardis & Alessandro Goglio & Marco Malgarini, 1996. "Regional specialization and shocks in Europe: Some evidence from regional data," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 132(2), pages 197-214, September.
    9. Eichengreen, Barry, 1993. "European Monetary Unification," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1321-57, September.
    10. repec:fth:iniesr:430 is not listed on IDEAS
    11. Bayoumi, Tamim & Prasad, Eswar, 1995. "Currency Unions, Economic Fluctuations and Adjustment: Some Empirical Evidence," CEPR Discussion Papers 1172, C.E.P.R. Discussion Papers.
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    Cited by:
    1. Longhi, Simonetta & Nijkamp, Peter & Traistaru, Iulia, 2004. "Economic integration and manufacturing location in EU accession countries," Serie Research Memoranda 0003, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    2. Simonetta Longhi & Peter Nijkamp & Iulia Traistaru, 2003. "Determinants of Manufacturing Location in EU Accession Countries," ERSA conference papers ersa03p310, European Regional Science Association.
    3. Villaverde, Jose, 2000. "Emu And Regional Disparities In Spain," ERSA conference papers ersa00p501, European Regional Science Association.
    4. Grigori Fainstein, 2005. "The impact of trade liberalisation on adjustment of regional wages in Estonia," ERSA conference papers ersa05p240, European Regional Science Association.
    5. Grigory Fainstein & Natalja Lubenets, 2004. "Economic Integration and Regional Specialisation Development in Estonia," Working Papers 106, Tallinn School of Economics and Business Administration, Tallinn University of Technology.
    6. Traistaru, Iulia & Nijkamp, Peter & Longhi, Simonetta, 2002. "Regional specialization and concentration of industrial activity in accession countries," ZEI Working Papers B 16-2002, ZEI - Center for European Integration Studies, University of Bonn.

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