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Is Euro Area an Optimal Currency Area and What Barriers Could Obstruct Its Future Development?


  • Irena Vrnáková

    () (University of Economics, Prague)

  • Hana Bartušková

    () (University of Economics, Prague)


European monetary integration has been a really ambitious project since the very beginning and during last decade it succeeded in many areas. The euro was launched without serious problems and since then the European Central Bank has managed to achieve a low inflation rate in the whole euro area. The European Union and the euro experienced the world economic crisis in 2008 and dealing with the impacts of this crisis was a real challenge for the EU, for all the member states, single monetary policy and the euro area and also for the whole integration process. In our paper we will proceed from the Optimal Currency Area model (OCA, developed by Robert A. Mundell, Peter Kenen and Ronald McKinnon) to conditions of the euro area and European currency integration process. The paper will summarize the OCA model and test the criteria for OCA in European conditions and identify barriers to the OCA as imperfect mobility of the labour market, an unfinished single market, insufficient coordination and cooperation in common macroeconomic areas within the euro area, asymmetric shocks and others. The findings will show us that euro area does not exactly meet majority of criteria for OCA model but due to strong political will of European states is the euro project going to continue. This paper also discuss the perspectives of European monetary integration.

Suggested Citation

  • Irena Vrnáková & Hana Bartušková, 2013. "Is Euro Area an Optimal Currency Area and What Barriers Could Obstruct Its Future Development?," ACTA VSFS, University of Finance and Administration, vol. 7(2), pages 123-144.
  • Handle: RePEc:prf:journl:v:7:y:2013:i:2:p:123-144

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    References listed on IDEAS

    1. Isabelle Joumard & Per Mathis Kongsrud & Young-Sook Nam & Robert Price, 2004. "Enhancing the Cost Effectiveness of Public Spending: Experience in OECD Countries," OECD Economic Studies, OECD Publishing, vol. 2003(2), pages 109-161.
    2. Alt, James E. & Lassen, David Dreyer, 2006. "Fiscal transparency, political parties, and debt in OECD countries," European Economic Review, Elsevier, vol. 50(6), pages 1403-1439, August.
    3. Dollery, Brian E & Worthington, Andrew C, 1996. " The Empirical Analysis of Fiscal Illusion," Journal of Economic Surveys, Wiley Blackwell, vol. 10(3), pages 261-297, September.
    4. International Monetary Fund, 2005. "Fiscal Transparency and Economic Outcomes," IMF Working Papers 05/225, International Monetary Fund.
    5. Rose, Shanna, 2010. "Institutions and Fiscal Sustainability," National Tax Journal, National Tax Association, vol. 63(4), pages 807-837, December.
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    More about this item


    euro; euro area; monetary integration; European Union; Optimal Currency Area theory; single currency; single monetary policy;

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-


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