The Role of Heterogeneity in Creating Imbalances in the Euro Area
The aim of this paper is to assess the importance played by economic divergences in the current crisis of the euro area. Since the introduction of the single currency there were many debates regarding the heterogeneity of the countries that adopted it. Heterogeneity represents an impediment for the smooth adjustment in the event of asymmetric shocks. The optimal currency theory was the first to present the adjustment mechanisms. In order to quantify the influence of structural diversity on the disturbances in the euro area, we have analyzed the evolution of standard deviation for some of the key indicators. This study will provide a clear understanding of the factors that caused imbalances in the euro area. It is common to draw conclusions upon isolated factors that led to the present financial crisis and to find extreme solutions like the collapse of the monetary union in Europe. This article shows that analyzing the structure of the union gives an appropriate understanding of the mistakes that have been made.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Andros Gregoriou & Alexandros Kontonikas & Alberto Montagnoli, 2011. "Euro Area Inflation Differentials: Unit Roots and Nonlinear Adjustment," Journal of Common Market Studies, Wiley Blackwell, vol. 49(3), pages 525-540, 05.
- Schnabl, Gunther, 2008.
"Exchange rate volatility and growth in small open economies at the EMU periphery,"
Elsevier, vol. 32(1), pages 70-91, March.
- Schnabl, Gunther, 2007. "Exchange rate volatility and growth in small open economies at the EMU periphery," Working Paper Series 0773, European Central Bank.
- Jeffrey A. Frankel & Andrew K. Rose, 1996.
"The Endogeneity of the Optimum Currency Area Criteria,"
NBER Working Papers
5700, National Bureau of Economic Research, Inc.
- Frankel, Jeffrey A & Rose, Andrew K, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, vol. 108(449), pages 1009-1025, July.
- Frankel, Jeffrey A & Rose, Andrew K, 1996. "The Endogeneity of the Optimum Currency Area Criteria," CEPR Discussion Papers 1473, C.E.P.R. Discussion Papers.
- Jondeau, E. & Sahuc, J-G., 2007.
"Testing heterogeneity within the euro area,"
181, Banque de France.
- Klaus Desmet, 2002. "Asymmetric Shocks, Risk Sharing, and the Latter Mundell," Working Papers 0222, Banco de España;Working Papers Homepage.
- Slanicay Martin, 2011. "Structural Differences and Asymmetric Shocks between the Czech Economy and the Euro Area 12," Review of Economic Perspectives, De Gruyter Open, vol. 11(3), pages 168-192, January.
When requesting a correction, please mention this item's handle: RePEc:dug:journl:y:2012:i:1:p:77-85. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Florian Nuta)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.