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The regional impact of the single currency

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  • Martin Hallet

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Abstract

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.

Suggested Citation

  • Martin Hallet, 1998. "The regional impact of the single currency," ERSA conference papers ersa98p27, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa98p27
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    File URL: http://www-sre.wu.ac.at/ersa/ersaconfs/ersa98/papers/27.pdf
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    References listed on IDEAS

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    8. repec:hhs:iuiwop:430 is not listed on IDEAS
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    Cited by:

    1. Villaverde, Jose, 2000. "Emu And Regional Disparities In Spain," ERSA conference papers ersa00p501, European Regional Science Association.
    2. Grigory Fainstein & Natalja Lubenets, 2004. "Economic Integration and Regional Specialisation Development in Estonia," Working Papers 106, Tallinn School of Economics and Business Administration, Tallinn University of Technology.
    3. Traistaru, Iulia & Nijkamp, Peter & Longhi, Simonetta, 2002. "Regional specialization and concentration of industrial activity in accession countries," ZEI Working Papers B 16-2002, University of Bonn, ZEI - Center for European Integration Studies.
    4. Simonetta Longhi & Peter Nijkamp & Iulia Traistaru, 2003. "Determinants of Manufacturing Location in EU Accession Countries," ERSA conference papers ersa03p310, European Regional Science Association.
    5. Grigori Fainstein, 2005. "The impact of trade liberalisation on adjustment of regional wages in Estonia," ERSA conference papers ersa05p240, European Regional Science Association.

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