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The regional impact of the single currency


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  • Martin Hallet


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    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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    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. repec:fth:iniesr:430 is not listed on IDEAS
    2. Krugman, Paul & Venables, Anthony J., 1995. "Globalization and the Inequality of Nations," Working Paper Series, Research Institute of Industrial Economics 430, Research Institute of Industrial Economics.
    3. 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, Springer, vol. 132(2), pages 197-214, September.
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    9. Maurice Obstfeld & Giovanni Peri, 1998. "Regional non-adjustment and fiscal policy," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 13(26), pages 205-259, 04.
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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, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics 0003, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    2. Villaverde, Jose, 2000. "Emu And Regional Disparities In Spain," ERSA conference papers, European Regional Science Association ersa00p501, European Regional Science Association.
    3. Grigori Fainstein, 2005. "The impact of trade liberalisation on adjustment of regional wages in Estonia," ERSA conference papers, European Regional Science Association ersa05p240, European Regional Science Association.
    4. Traistaru, Iulia & Nijkamp, Peter & Longhi, Simonetta, 2002. "Regional specialization and concentration of industrial activity in accession countries," ZEI Working Papers, ZEI - Center for European Integration Studies, University of Bonn B 16-2002, ZEI - Center for European Integration Studies, University of Bonn.
    5. Grigory Fainstein & Natalja Lubenets, 2004. "Economic Integration and Regional Specialisation Development in Estonia," Working Papers, Tallinn School of Economics and Business Administration, Tallinn University of Technology 106, Tallinn School of Economics and Business Administration, Tallinn University of Technology.
    6. Simonetta Longhi & Peter Nijkamp & Iulia Traistaru, 2003. "Determinants of Manufacturing Location in EU Accession Countries," ERSA conference papers, European Regional Science Association ersa03p310, European Regional Science Association.


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