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The Crisis in the Euro Area: An Analytic Overview

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  • Gibson, Heather D.
  • Palivos, Theodore
  • Tavlas, George S.

Abstract

This paper provides an introduction to the special issue “The Crisis in the Euro Area”. We take stock of what the euro area crisis has taught us about monetary integration. At the inception of the euro area in 1999, the main parameters of the theory of monetary integration seemed to have been pretty well-settled. Although it was common knowledge that the euro area fell short of fully satisfying all the conditions needed for an optimally-functioning monetary union, most politicians and many economists thought that the euro area satisfied enough conditions so that it would not encounter major difficulties. This paper discusses several developments that came as surprises about the conditions needed for monetary unification as the euro crisis unfolded. These developments include the need of an adequate adjustment mechanism, the links between banking and sovereign crises, and the sharp costs of adjustment to adverse asymmetric shocks.

Suggested Citation

  • Gibson, Heather D. & Palivos, Theodore & Tavlas, George S., 2014. "The Crisis in the Euro Area: An Analytic Overview," Journal of Macroeconomics, Elsevier, vol. 39(PB), pages 233-239.
  • Handle: RePEc:eee:jmacro:v:39:y:2014:i:pb:p:233-239
    DOI: 10.1016/j.jmacro.2013.09.014
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    More about this item

    Keywords

    Financial crises; Euro-area; Monetary integration; Optimum currency areas; Adjustment mechanism;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G01 - Financial Economics - - General - - - Financial Crises

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