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Is the Eurozone an Optimum Currency Area?

Author

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  • Marek Louzek

    (Prague University of Economics and Business, Faculty of Economics)

Abstract

The objective of this paper is to find out the past, the present and the future of the euro. The first part presents the euro as an edifying currency experiment. The second part analyses the economic performance of the euro area. The third part points out the internal conflicts inside the eurozone. The fourth part explains why the eurozone is not an optimum currency area. The fifth part outlines the controversy around the purchase of bonds by the ECB. The sixth part poses the question whether it is still possible to save the euro. The eurozone is not an optimum currency area. In theory, it could become one, provided that high mobility of labour is achieved, wages are flexible downwards, asymmetrical shocks do not occur and there is a stable system of national finances, supplemented by an effective system of fiscal compensations. Since these conditions are not met, the euro has become a trap for the member states. The euro has not had the effect of converging economic development in the eurozone; quite the opposite, it has had a diverging effect.

Suggested Citation

  • Marek Louzek, 2023. "Is the Eurozone an Optimum Currency Area?," International Journal of Economic Sciences, European Research Center, vol. 12(2), pages 63-82, November.
    • Handle: RePEc:aop:jijoes:v:12:y:2023:i:2:p:63-82
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    References listed on IDEAS

    as
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    3. Drudi, Francesco & Durré, Alain & Mongelli, Francesco Paolo, 2012. "The interplay of economic reforms and monetary policy: the case of the euro area," Working Paper Series 1467, European Central Bank.
    4. Paul Welfens, 2011. "From the transatlantic banking crisis to the euro crisis?," International Economics and Economic Policy, Springer, vol. 8(1), pages 15-29, April.
    5. Gunter Coenen & Roland Straub & Mathias Trabandt, 2012. "Fiscal Policy and the Great Recession in the Euro Area," American Economic Review, American Economic Association, vol. 102(3), pages 71-76, May.
    6. Francesco Drudi & Alain Durré & Francesco Paolo Mongelli, 2012. "The Interplay of Economic Reforms and Monetary Policy: The Case of the Eurozone," Journal of Common Market Studies, Wiley Blackwell, vol. 50(6), pages 881-898, November.
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    8. Maximilian Fandl, 2018. "Monetary and Financial Policy in the Euro Area," Springer Texts in Business and Economics, Springer, number 978-3-319-72643-4, August.
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    More about this item

    Keywords

    euroeuro areaoptimum currency area;

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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