External Trade and Monetary Policy in a Currency Area

2010 ◽  
Author(s):  
Martina Cecioni
Keyword(s):  
Monetary Policy ◽  
External Trade ◽  
Currency Area

Adventures of the optimum currency areas theory

2016 ◽  
pp. 56-76 ◽  
Author(s):  
S. Moiseev
Keyword(s):  
Public Policy ◽  
Economic Theory ◽  
Monetary Policy ◽  
Exchange Rate ◽  
Historical Development ◽  
National Currency ◽  
Optimum Currency Areas ◽  
Currency Area ◽  
Optimum Currency

The theory of optimum currency areas was created by three famous economists, R. Mandell, R. McKinnon and P. Kenen. They identified characteristics that potential participants of a currency area should possess in order to make it feasible to surrender the independent monetary policy and the adjustment of an exchange rate of a national currency. We consider the historical development of the optimum currency areas theory and review factors which led to renewal of the theory in the early 1990s. The article focuses on some important links between historic facts, development of the economic theory, and public policy.

Is the Euro Working? The Euro and European Labour Markets

2004 ◽  
Vol 24 (2) ◽  
pp. 147-168 ◽  
Author(s):  
STEPHEN J. SILVIA
Keyword(s):  
Monetary Policy ◽  
Monetary Union ◽  
Euro Area ◽  
European Monetary Union ◽  
Structural Adjustment ◽  
Labour Markets ◽  
Fiscal Consolidation ◽  
European Monetary ◽  
Currency Area ◽  
Made In

Now that time has passed since the introduction of the euro as a commercial currency, it is possible to assess many arguments made in the abstract during the 1990s about European monetary union. This article shows that the euro zone still falls short as an optimal currency area in most respects. In particular, it undertakes an empirical analysis of the labour market and finds no progress toward flexibility or integration. These results challenge assertions of ‘endogenous currency area’ proponents that the euro area would become optimal ‘after the fact’, and that labour markets would serve as the principal avenue of adjustment. Instead, a ‘rigidity trap’ has developed in the euro area, consisting of relatively tight monetary policy, forced fiscal consolidation, and a risk of deflation in some economies. These conditions have compounded the difficulties of structural adjustment in European labour markets.

scholarly journals Political economy of the euro area crisis

2011 ◽  
Vol 58 (5) ◽  
pp. 593-604 ◽  
Author(s):  
Casimir Dadak
Keyword(s):  
Political Economy ◽  
Monetary Policy ◽  
Business Cycles ◽  
Exchange Rates ◽  
Euro Area ◽  
Monetary Integration ◽  
Economic Policies ◽  
Loss Of Control ◽  
Demand Side ◽  
Currency Area

For many experts the true motivation behind the introduction of a single currency in Europe is political rather than economic. This view is based on the fact that the euro area does not constitute an optimal currency area and, therefore, the costs of monetary integration are likely to outweigh the benefits. In particular, the loss of control over monetary policy and exchange rates make overcoming asymmetric demand-side shocks very painful. Moreover, the monetary union lacks a common fiscal authority that could help in smoothing out business cycles. The present crisis exposed these vulnerabilities and, unfortunately, so far economic policies adopted in the region have failed to rectify these shortcomings.

Optimum Currency Area Theory and Business Cycle Convergence in EMU

2016 ◽  
pp. 67-91
Author(s):  
Emin Ertürk ◽  
Derya Yılmaz ◽  
Işın Çetin
Keyword(s):  
Monetary Policy ◽  
Business Cycles ◽  
Business Cycle ◽  
Debt Crisis ◽  
Optimum Currency Area ◽  
Currency Area ◽  
The Business Cycle ◽  
The Times ◽  
Optimum Currency ◽  
Over Time

Which countries should be in Economic and Monetary Union (EMU)? This question has been debated frequently in the aftermath of the Sovereign Debt Crisis. But this has been asked in every stages of European integration. This discussion has rooted in the Optimum Currency Area (OCA) theory. The theory simply reveals that; if the countries have similar business cycles, one size fits all monetary policy would able to address the problems of member countries. Otherwise, no single monetary policy could be able to satisfy all members. In this respect, we test the business cycle convergence in EMU12 countries over time and we have also analyzed the effects of crisis on this convergence. We have found that business cycles converged over time in these countries. This convergence rises in the times of crisis as they slump together after the shock, but falls sharply in the aftermath of the crisis. This reflects the divergent recovery paths of the countries and put a pressure on single monetary policy especially after crisis.

The Common Market of Political Parties

1971 ◽  
Vol 6 (4) ◽  
pp. 448-461 ◽  
Author(s):  
H. Vredeling
Keyword(s):  
Monetary Policy ◽  
Political Parties ◽  
European Integration ◽  
European Community ◽  
Common Market ◽  
The Political ◽  
Customs Union ◽  
External Trade ◽  
The Common ◽  
Common Policy

A CURIOUS PHENOMENON MAY BE NOTED WITHIN THE EUROPEAN Community, and also in the negotiations on the entry of other European countries into it. This is the absence of any move towards European integration among the political parties in the member states. Rather surprisingly, an obstinate silence prevails in Europe and within the national political parties regarding this deficiency. One cannot help wondering what is the reason for this and what can be done to break this silence.Outwardly the process of European integration presents in the main an economic aspect. The EEC Treaty is a classic example of this. The goal striven for is a customs union with a common policy in the economic sphere. Thus the first steps are being taken in the Community towards a common policy in a number of sectors (agriculture, transport, energy, external trade). Recently attempts have been made to link this sector-by-sector policy through the inauguration of a common economic and monetary policy.

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