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The Euro: A "MUST" for small European states?


  • Ohr, Renate
  • Özalbayrak, Mehmet


This paper deals with the question of what impact membership of the European Monetary Union (EMU) has had on small European states. We will also analyze whether or to what extent a large number of small member states affect the EMU itself when they vastly outnumber the large countries. We conclude that the small countries in the European Union are far from creating a homogeneous group. They differ in the length of EU membership, income per capita, membership and non-membership of the EMU, production structure, foreign trade policy, and stability readiness. However, they do share some characteristics, particularly their relatively high openness, through which domestic macroeconomic variables are easily influenced by external shocks. The welfare gains of a small country joining the eurozone depend on the extent to which the benefits (if existent) of higher financial credibility outweigh the loss of autonomous monetary policy. Finally, with regard to their significance in the EMU, in no case should cutbacks be made for small countries concerning the stability requirements.

Suggested Citation

  • Ohr, Renate & Özalbayrak, Mehmet, 2012. "The Euro: A "MUST" for small European states?," Center for European, Governance and Economic Development Research Discussion Papers 131, University of Goettingen, Department of Economics.
  • Handle: RePEc:zbw:cegedp:131

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    References listed on IDEAS

    1. König, Jörg & Ohr, Renate, 2011. "Small but beautiful? Economic impacts of the size of nations in the European Union," Center for European, Governance and Economic Development Research Discussion Papers 128, University of Goettingen, Department of Economics.
    2. 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.
    3. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 7-46, April.
    4. Casella, Alessandra, 1996. "Large countries, small countries and the enlargement of trade blocs," European Economic Review, Elsevier, vol. 40(2), pages 389-415, February.
    5. Zuzana Brixiova & Margaret Morgan & Andreas Wörgötter, 2009. "Estonia and Euro Adoption: Small Country Challenges of Joining EMU," OECD Economics Department Working Papers 728, OECD Publishing.
    6. Harald Badinger & Fritz Breuss, 2009. "Country size and the trade effects of the euro," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 145(2), pages 207-223, July.
    7. Angelos Sepos, 2005. "Differentiated Integration in the EU: the position of small member states," EUI-RSCAS Working Papers 17, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
    8. Coricelli, Fabrizio & Jazbec, Bostjan & Masten, Igor, 2006. "Exchange rate pass-through in EMU acceding countries: Empirical analysis and policy implications," Journal of Banking & Finance, Elsevier, vol. 30(5), pages 1375-1391, May.
    9. Renate Ohr, 2009. "European Monetary Union at Ten: Had the German Maastricht Critics Been Wrong?," Departmental Discussion Papers 141, University of Goettingen, Department of Economics.
    10. Schnabl, Gunther, 2008. "Exchange rate volatility and growth in small open economies at the EMU periphery," Economic Systems, Elsevier, vol. 32(1), pages 70-91, March.
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    Cited by:

    1. König, Jörg & Ohr, Renate, 2012. "Messung ökonomischer Integration in der Europäischen Union: Entwicklung eines EU-Integrationsindexes," Center for European, Governance and Economic Development Research Discussion Papers 135, University of Goettingen, Department of Economics.
    2. repec:got:cegedp:135 is not listed on IDEAS

    More about this item


    Euro; European Monetary Union; economic integration; small open economy;

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F15 - International Economics - - Trade - - - Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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