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The paper analyses the progress eurozone members made towards the convergence of inflation rates, which is a necessary condition for the effective implementation of the common monetary policy broadly appropriate for all members. It was expected that the common monetary policy would lead to the convergence of member states' economic performance, including inflation rates. The literature review shows that the majority of authors agree that a significant convergence process occurred before 1999, but no further progress was made after that. Our analysis indicates that inflation processes in member countries are diverse. Namely, monetary stability has been achieved in some countries, while inflation is more volatile in others. There is an insufficient correlation between inflation rates, the different transmission of shocks to inflation and different exposure to risks of rising energy and food prices. We conducted a unit root test on the series of inflation differentials for each country to determine which countries were in a process of absolute convergence. In the group of the first 12 members, we found evidence of convergence for the majority of countries, as there is no unit root. Thus, individual countries indeed made progress toward greater monetary stability (and the EMU level). We examined the standard deviations of the inflation differentials in the group of converging countries (separately for converging core and peripheral countries) and found no evidence that these groups of countries are becoming more homogeneous. In the group of new EMU members, we found evidence of convergence towards the EMU average for only four countries in the period of their membership, but not in the previous period. [ABSTRACT FROM AUTHOR]

Target2 is the Eurozone's cross-border payment system, which is mandatory for the settlement of euro transactions involving Eurozone central banks. It is being used to save the Eurozone from imploding. A key underlying problem is that the Eurozone does not satisfy the economic conditions for being an Optimal Currency Area, i.e., a geographical area over which a single currency and monetary policy can operate on a sustainable, long-term basis. The different business cycles in the Eurozone, combined with poor labour and capital market flexibility, mean that systematic trade surpluses and deficits will build up because inter-regional exchange rates can no longer be changed. Surplus regions need to recycle the surpluses back into deficit regions via transfers to keep the Eurozone economies in balance. But the largest surplus country—Germany—refuses to formally accept that the European Union is a 'transfer union'. However, deficit countries, including the largest of these—Italy—are using Target2 for this purpose. Target2 has become a giant credit card for Eurozone members that import more than they export to other members, but with two differences compared with normal credit card debt: neither the debt nor the interest that accrues on the debt ever needs to be repaid. Furthermore, the size of the deficits being built up is causing citizens in deficit countries to lose confidence in their banking systems, leading them to transfer their funds to banks in surplus countries. Target2 is also being used to facilitate this capital flight. However, these are not viable long-term solutions to systemic Eurozone trade imbalances and weakening national banking systems. There are only two realistic outcomes. The first is a full fiscal and political union, with Brussels determining the levels of tax and public expenditure in each member state—which has long been the objective of Europe's political establishment. The second outcome is that the Eurozone breaks up. [ABSTRACT FROM AUTHOR]

The mobility of factors of production from the very beginnings of the theory of the optimal currency area (OCA) stands out as one of the primary mechanisms for achieving a balance of payments, i.e. sustainability of the monetary union (Mundell criterion). However, there is a significant qualitative difference between the monetary union of countries with similar income levels and the one with different development stages Namely, in the first case, labor mobility, as a rule, has short-term economic effects, while it has a longer-term (more negative) impact – especially on the long-run aggregate supply (LRAS). Many Eastern European countries, which expressed a desire to become part of European integration and the monetary union after the communist ruin, experienced this. In a previous paper, the authors set the thesis about “Impossible Trinity of Developing Countries”. In this paper, the aspiration is to confirm the validity of this theory by analyzing Greece within the period 1999-2020, specifically observing the impact of three variables (fiscal policy, social development level, and level of economic freedom) on the emigration of the population under conditions of monetary union and labor force mobility. The results obtained in this research indicate that the fiscal policy in the observed period was the most significant factor in explaining migration trends. The implications for developing countries that are currently entering (such as Croatia) or intend to enter the monetary union with more developed countries in the future are particularly significant.

Unlike previous studies, the current study uses oil price and inflationary shocks to assess the feasibility of actualizing the ECOWAS Vision 2020, which is aimed at creating a monetary union. With the help of the Blanchard and Quah (BQ) decomposition for a sample from 1975:05 to 2018:08, two sets of models are estimated: models for inflationary shocks and models for oil price shocks. It is found that although the vision is a mirage, the creation of a common currency can serve as a shock absorber against the negative spillovers of global and regional inflationary shocks. The study also finds that oil price shocks lead to appreciation of the currency for the oil exporting country Nigeria, while Nigeria, the Gambia and Ghana stand out in their responses to oil price shocks. The study recommends that these countries cannot be part of the Vision and that more coordination among ECOWAS members is needed before this Vision can be actualised.

How should history judge the euro crisis and the way it was handled? Does it qualify as a policy fiasco in the sense that it was avoidable? Or could the crisis at least have been handled in a manner which substantially reduced its destructive impact on the economic and social welfare and politics of Europe? These questions necessitate counter-factual analysis. Nevertheless, they deserve attention. How history is interpreted impacts decisions about today and tomorrow. The article explores three discourses on economic governance: on financial stability, fiscal policy and on growth. Each discourse came with pathologies: they did not sensitize decision-makers to crucial negative consequences of the policy choices they privileged at decisive points in the sequence of boom, bust and (policy engineered) painfully slow recovery. The ECB has quietly changed its ways, but unwillingness to confront the crisis head-on as a policy fiasco can obstruct learning opportunities that are important for the EU and the Eurozone going forward. [ABSTRACT FROM AUTHOR]

The aim of this paper was to test the hypothesis of business cycle convergence in member countries of the Economic Community of West African States (ECOWAS) engaged in a monetary union process. We applied the concepts of beta‐convergence and sigma‐convergence to business cycles in the region in the period 1990–2018. Two analytical approaches suggested that during this period, the hypothesis of the convergence of business cycles cannot be rejected. The study highlighted the positive effect of trade intensity on the convergence of member countries' business cycles, in line with the theory of the endogeneity of optimum currency area criteria. These results imply that the initial asymmetric nature of the business cycles of ECOWAS countries does not represent an economic obstacle to the creation of a monetary union in the zone. This cyclical convergence is likely to accelerate with the intensification of trade resulting from the newly created union owing to deeper financial integration and the elimination of transaction costs and uncertainty associated with exchange rate volatility. [ABSTRACT FROM AUTHOR]

This paper assesses the economic support for the creation of an Economic Community of West African States (ECOWAS) monetary union encompassing all its 15 members, an objective that was set more than 30 years ago. In line with previous empirical research, our conclusion is that the adoption of a common currency by the whole region is not recommended. This work takes a step forward and assesses alternative ways to reduce the current number of currencies in circulation in the Community. Based on our results, we suggest (i) the merging of the currencies of Guinea, Liberia and Sierra Leone into a single currency and (ii) the Gambia to join the West African Economic and Monetary Union (WAEMU). [ABSTRACT FROM AUTHOR]

The Euro has been a hotly debated issue in Germany. Still 20 years after the introduction of the Euro there exist many opponents in Germany. Are their arguments correct? Has Germany benefitted from the Euro or is Germany suffering from the Euro? The article discusses these questions by looking back on the theoretical foundations for a single currency. Following this analysis, the macroeconomic performance of the Eurozone and especially of Germany is presented. Macroeconomic calculations show that Germany seems to be the biggest winner of the introduction of the Euro. The article presents some explanations for this result and makes a short-term and long-term appraisal about winners and losers and potential problems in the future. Different scenarios will be outlined for overcoming the problems with the Euro and lessons for the future will be drawn.

Copyright of Efil Journal of Economic Research / Efil Ekonomi Araştırmaları Dergisi is the property of Efil Journal of Economic Research and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

We document stark asynchronicity across U.S. states, particularly across groups of states whose populations have voted consistently Democrat or consistently Republican in national elections; and we show that the risk-sharing channels of these groups of states differ substantially. However, we find that these groups of states–even swing states, where the role of fiscal flows is small (on par with Europe's)–do share risk. Indeed, we halve previous estimates of states' residual risk by using new data to account for sharing risk through changes in population, prices, and durable goods consumption. These findings indicate that political differences alone do not themselves preclude macroeconomic risk sharing within a monetary union. [ABSTRACT FROM AUTHOR]

Robert Mundell (1961. “A Theory of Optimum Currency Areas.” The American Economic Review 51 (4): 657–665) framed the fixed-versus-flexible exchange rate controversy in a novel way when he focused attention on currency areas and the ingredients necessary for a group of nations to form an optimal currency area (OCA). This paper proposes an analogous theory for cryptocurrencies, called optimal currency scope (OCS), and explains the conditions necessary for an OCS to exist. In contrast to an OCA, which is defined by its non-overlapping geographic areas, an OCS is defined by its multiple-overlapping attributes and the needs they solve, which we call scope. Scopes are not geographic and have fuzzy boundaries; so, the possibility of competing currencies in a single scope needs to be considered. The central issues surrounding an OCS are the optimal number and magnitude of currency attributes, rather than whether nations should adopt fixed versus fluctuating exchange rates. Similar to the findings since Mundell first introduced his OCA Theory, we find that the optimum number of cryptocurrency attributes and, therefore, the optimal number of cryptocurrencies must be determined empirically rather than theoretically. [ABSTRACT FROM AUTHOR]

This study appraised the preparedness of Economic Community of West African States (ECOWAS) towards the adoption of a common currency by analysing the degree of symmetry and sizes of identified shocks across member countries. The analysis was situated within the framework of the Optimum Currency Area (OCA) theory and the structural vector autoregressive (SVAR) model was employed on secondary data from 1975 to 2015. The findings reveal that external supply shocks across ECOWAS countries are symmetric except for Sierra Leone, while demand, supply and monetary shocks among member countries are asymmetric. The absolute relative sizes of the different shocks across member countries are high and different in sizes. This implies that ECOWAS countries are not fully prepared to adopt a common currency and the fixed exchange rate as a stabilization policy for the entire West Africa. Hence ECOWAS governments should further shift the targeted date beyond 2020 to create ample time for member countries to get fully prepared.

Copyright of Investigación Económica is the property of Universidad Nacional Autonoma de Mexico, Facultad de Economia and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Journal of International Social Research is the property of Journal of International Social Research and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper is organized as follows: the first part briefly outlines the Optimal Currency Area (OCA) theory. The second part focuses on the methodology used in the analysis, while the results of the analysis itself are presented in the third section. The final part of the paper provides conclusions and discussions of the main results. The aims of the article. The aims of the article is to evaluate one of the conditions of the OCA theory – the convergence criterion. The results of the analysis. This paper deals with determining the factors that impact the convergence of the Czech economy to the economy of Eurozone. Moreover, it attempts to determine the level of economic convergence in the EU using the β-convergence and σ-convergence techniques. The existence of this convergence is one of the necessary conditions for the creation of Monetary Union as stems from the Optimal Currency Area theory. The paper employs the OCA theory as the key theoretical basis for empirical analysis and evaluates the cyclical and structural synchronization by the means of correlation coefficients of the GDP development, industrial production, inflation and interest rates. It should be noticed that the Czech economy is constantly not synchronized with the Eurozone in terms of demand shocks which might be seen as a potential problem. As far as the international comparison goes, the Czech Republic is convergent with the core of Eurozone countries, possibly even more than some EA member states. This fact demonstrates the undisputable level of heterogeneity in the Monetary Union. When it comes to the existence of economic convergence among the current EU member states during the time period of 1995-2012, the main findings can be summarized as follows: there was σ-convergence during the whole period concerned among the EU27, with some shorter sub-periods of divergence (as in the late 1990s and in 2009-2010). Moreover, there is quite a robust evidence of the existence of β-convergence in 1995-2012 since the relatively poor states grew on average faster than the rich ones. The pace of catching up increased after the EU Eastern Enlargement in 2004. In addition, in the 1990s we detected no convergence, while in the pre-crisis 2000s we found evidence for the convergence being the fastest and the most robust. Since the start of the world economic and financial crisis (from 2008 onwards), the convergence was not detected. Conclusions and directions of further researches. The results point out at the considerable level of convergence of the Czech economy (except the shock analysis), even though the values seem to be overvalued due to the recent economic and financial crisis. But now it appears that it is optimal to keep the Czech crown as the national currency for some time yet although the level of convergence probably improves over time.

There has been a broad discussion about the viability of the European Monetary Union (EMU) in its present and prospective confines. Generally, the EMU, consisting of 19 countries, is not considered an optimal currency area due to low labor market flexibility, autonomous fiscal policies, and structural differences among its members. Considerations about the endogeneity effect of currency unions lead to the question whether the EMU will become more viable over time. According to the endogenity hypothesis formulated by Frankel and Rose [1996, 2000], a common currency area may gradually become an optimal currency area at some future point (ex post unification), despite not having been an optimal currency area (OCA) prior to (ex ante) currency unification. Currency unification should bring about increased intra-industry trade and greater business cycle synchronization among member states. The most recent literature and analyses presented in this paper suggest that the endogenity effect in the EMU has been frail since its onset. While real convergence between EMU member states has not advanced, divergence in i.a. economic structures, national income and productivity levels is observed. The most important economic mechanisms reinforcing convergence and divergence among monetary union members are presented in this paper. Using recent data and related research results, we show a significant divergence in economic structures, business cycle synchronization and productivity levels among Eurozone members in the last decade. The Krugman sectorial dissimilarity index is applied to measure changes in industrial similarity among member countries and the Hodrick-Prescott filter to estimate business cycle synchronization in the EMU. These divergence tendencies have been strengthened by the global financial crisis of 2008 and persist, calling for reforms and new policies within the EMU.

Before the advent of sophisticated international financial markets, a widely accepted belief was that within a monetary union, a union-wide authority orchestrating fiscal transfers between countries is necessary to provide adequate insurance against country-specific economic fluctuations. A natural question is then: Do sophisticated international financial markets obviate the need for such an active union-wide authority? We argue that they do. Specifically, we show that in a benchmark economy with no international financial markets, an activist union-wide authority is necessary to achieve desirable outcomes. With sophisticated international financial markets, however, such an authority is unnecessary if its only goal is to provide cross-country insurance. Since restricting the set of policy instruments available to member countries does not create a fiscal externality across them, this result holds in a wide variety of settings. Finally, we establish that an activist union-wide authority concerned just with providing insurance to member countries is optimal only when individual countries are either unable or unwilling to pursue desirable policies. [ABSTRACT FROM AUTHOR]

The date of Polish accession to the Economic and Monetary Union has not yet been established, which causing that the Polish accession to the eurozone is a quite distant project, even "futuristic". The choice of the appropriate term of Polish accession to the euro zone is accompanied by numerous disputes concerning the actual readiness of the Polish economy to participate in the system of the single currency euro. Today, the foundation of this dispute remains the financial crisis of eurozone. The European Union is currently experiencing one of the most important challenges in its entire history. However, current remains the issue of fulfillment by Poland criteria of nominal, real and legal convergence, which indicate the level of fulfillment of conditions set by the concept of an optimum currency area and the possibility of a relatively safe functioning in the framework of this area.

Since late 2007, the Eurozone has been embroiled in a crisis that has seen GDP per capita stagnate, public debt soar, and unemployment reach record levels. This article argues that the Eurozone crisis will inevitably force fundamental changes in the structure of the EU. The only way to make the Eurozone work is through deeper fiscal integration of Eurozone economies. Yet wholesale fiscal integration cannot be achieved in the near term, due to the fact that EU citizens continue to identify more with their own nationalities than with Europe as a whole. The Eurozone economies of southern Europe will, therefore, continue to flounder, leading to further anti- EU sentiment. Anti- EU sentiment may eventually increase up to the point where one or all of these countries leave the Eurozone or the EU altogether. These propositions are supported with arguments from economic theory, and are bolstered by evidence from surveys and opinion polls. [ABSTRACT FROM AUTHOR]

This article is a step towards empirically assessing how close the Eurozone is to becoming an 'optimal currency area', as originally defined by Mundell (). For this purpose we have compiled ten indicators, organised them in four partial indices, and summarised them in an overall indicator of 'optimality'. The resulting picture is mixed, with zone optimality not increasing when circumstances were favourable but the trend towards integration returning after the 2008-14 crisis. The suggestion is that disintegration during the crisis, rather than being evidence of failure of the Eurozone when the going was tough, showed a self-healing mechanism at work. However, our measurements and indices show that optimality is much further away than it was in 1999, when the euro was launched. [ABSTRACT FROM AUTHOR]

Copyright of Research Papers of the Wroclaw University of Economics / Prace Naukowe Uniwersytetu Ekonomicznego we Wroclawiu is the property of Uniwersytet Ekonomiczny we Wroclawiu and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Before the advent of sophisticated international financial markets, a widely accepted belief was that within a monetary union, a union-wide authority orchestrating fiscal transfers between countries is necessary to provide adequate insurance against country-specific economic fluctuations. A natural question is then: Do sophisticated international financial markets obviate the need for such an active union-wide authority? We argue that they do. Specifically, we show that in a benchmark economy with no international financial markets, an activist union-wide authority is necessary to achieve desirable outcomes. With sophisticated financial markets, however, such an authority is unnecessary if its only goal is to provide cross-country insurance. Since restricting the set of policy instruments available to member countries does not create a fiscal externality across them, this result holds in a wide variety of settings. Finally, we establish that an activist union-wide authority concerned just with providing insurance across member countries is optimal only when individual countries are either unable or unwilling to pursue desirable policies. [ABSTRACT FROM AUTHOR]

In this article we analyze the process of monetary integration in Europe, identifying the structural determinants and the dysfunctional elements in the institutions of the European Union. Secondly, we explain two prevailing discourses that fail in interpreting the events: on the one hand, a purely ideological position that see integration as a process of convergence that should not be interfered with; on the other hand, a purely idealist perspective, according to which the ideal of integration will prevail over any contradiction engendered by the institutional system. The combination of these two perspectives helped justify post crisis interventions (fiscal consolidation) and the institutional design that followed, which eventually aggravated the macroeconomic instability in the area. [ABSTRACT FROM AUTHOR]

Based on optimal currency area theories, this paper applies the empirical methodology of structural VAR to revisit the question of whether UK should join or not the Euro zone. Correlations of effective exchange rates between UK and US on one side and between UK and its major European partners (Germany and France) on the other side are first estimated. Correlations between macro-structural shocks are then estimated and results of both approaches are combined to provide conclusions on the appropriateness of a floating regime of the British Pound or of the integration to the Euro zone. A dynamic analysis shows that UK structural evolution over the period 1970-2008 tends to favor the option of integration to the Euro zone. These results have to be qualified by taking into account the specific position of UK with London as a global financial center and political issues which dominate the debate.

The monetary union in Europe may be treated as a specific example of the international system, which is applicable in monetary relations. The creation of Eurozone was a political decision, taking shape over several years in a grand bargain. The purpose of this article was to analyse the relationship between the political and economic system during the crisis of the common currency. This applies above all to monetary system in Europe, where the interactions between politics and the economy are very visible. In this context, the consequences of the adoption by Slovakia of the single currency were presented. The paper was based on the theory of optimal currency areas and the theory of convergence. The strengthening of inter-governmentalism and hierarchy between Member States supports the improvement of controllability and management. However, the competition for leadership was a potentially destabilising factor. Analysis of selected Slovak economic indicators showed that despite the problems caused by the crisis in 2009, the adoption of a common currency did not result in a significant price increase or other negative economic phenomena in the longer term. [ABSTRACT FROM AUTHOR]

In this article, we use the unrestricted two-regime autoregressive threshold model to test both nonlinearity and stationarity of China's real exchange rate against its Hong Kong and Macau special administrative regions (SARs). Our main finding is that China's real exchange rate is neither linear nor stationary, indicating that the purchasing power parity does not hold between China Mainland and its two SARs, which implies, to certain extent, the three economies may not meet the condition of constituting an optimal currency area. [ABSTRACT FROM AUTHOR]

In accordance with Treaties and assumed obligations, Romania should adopt Euro when it is "ready". As EU-member, there is no possibility to avoid the adoption of Euro, only to postpone on an indefinite time this decision. The decision about the introduction of Euro remains a political one. Romania revised for many times the schedule on this specific matter. Euro, as Romanian Leu, is a fiat currency with legal money characteristics, serving for the same redistributive purpose. Euro Area has the same imperfections as local monetary arrangement. The paper will be focused on the fulfilment of pre-requisites (nominal and real convergence), the existing gap between Romania and Eurozone and the main arguments for adoption and against the adoption of single currency. The central idea of the paper is concentrated around the argument that it is irrelevant to discuss about the advantage of a specific tool for public policy that is the currency, taking into consideration that this tool (the fiat currency) is used to arbitrarily redistribution of resources among economic operators. Without a proper theory of money, all theories defining monetary integration (optimal currency area - OCA theory, convergence theories, Balassa-Samuelson effect) are submitted to be wrong and unrealistic. Therefore, under fiat-money conditions, the adoption of a single currency or not is impossible to be properly analysed and defined. [ABSTRACT FROM AUTHOR]

This paper deals with determining the factors that impact the convergence of the Czech economy to the economy of Eurozone. Moreover, it attempts to determine the level of economic convergence in the EU using the β-convergence and σ-convergence techniques. The existence of this convergence is one of the necessary conditions for the creation of Monetary Union as stems from the Optimal Currency Area (OCA) theory. The paper employs the OCA theory as the key theoretical basis for empirical analysis and evaluates the cyclical and structural synchronization by the means of correlation coefficients of the GDP development, industrial production, inflation and interest rates. The results point out at the considerable level of convergence of the Czech economy (except the shock analysis), even though the values seem to be overvalued due to the recent economic and financial crisis. [ABSTRACT FROM AUTHOR]

This article focuses on the developments following World War II that led to the creation of the single currency. It will point out how the initial diverging political and economic positions of France and Germany gradually moved toward a degree of convergence. After the death of President Pompidou, France discarded the approach stressing national sovereignty in monetary affairs that had been a feature of Gaullist foreign policy. After the fall of the Berlin Wall, Germany found that the single currency was not just the natural adjunct of the single market, which, at the time, had been the main argument used to sponsor it: the single currency appeared as a way of anchoring Germany’s future to Europe and thus was instrumental in getting Germany’s European partners, beginning with France, to endorse German reunification. The article examines how monetary union became divorced from the economic union that was supposed to accompany it. It looks at the way the monetary union has led to the adoption of deflationary policies in a number of European countries, and how this could be its death knell. [ABSTRACT FROM PUBLISHER]

Creation of a monetary union, carries along certain costs and benefits. Benefits of monetary union mainly stem from reducing transaction costs and eliminating exchange-rate uncertainty. On the other side, a country that joins a currency union, therefore gives up the opportunity to select a monetary policy, that it regards as optimal for its own circumstances. In this paper we explain the criteria of optimum currency area (OCA): degree of trade, similarity of business cycles, degree of labor and capital mobility and system of risk sharing. Viewed through the prism of these criteria, EMU is currently far from being an optimal currency area, especially in fulfillment criteria of labor mobility and fiscal integration. The aim of the paper is to highlight certain shortcomings of the EMU, such as its vulnerability to asymmetric shocks and its inability to act as predicted by the theory of optimum currency areas. Furthermore, we explain the reasons behind the difficulties that the euro area faced, and the problems that led to the outbreak of the sovereign debt crisis. At the end, we laid out several steps that could be taken or conditions that could be met in the euro zone in order to move toward optimization. [ABSTRACT FROM AUTHOR]

Net fiscal transfers are commonly seen as a possible means to ensure the well-functioning of a currency area. We show that US net fiscal transfers, measured as the difference between gross federal revenues and federal expenditures per state, are enormous. Moreover, we run panel regressions that suggest their dependence on relative GDP and relative GDP growth during crisis periods, evidence of net fiscal transfers from relatively rich to relatively poor states (redistributive effect) and to states with an underperforming economic development (stabilization effect). The Euro-zone (EZ) lacks a system of fiscal federalism, which raises the question of whether it should be established in the medium- and long-run. If so, which should be the magnitude of net fiscal transfers? We calculate these transfers hypothetically for 1999–2010, using a relative volume comparable to the one in the USA. [ABSTRACT FROM AUTHOR]

The introduction of the Euro currency, which replaced a number of local European currencies, is one of the most interesting monetary experiments. This project was presented to have a lot of advantages for the participants to this single currency area, such as comparable prices, lower trading costs, lower risks, etc. The specific requirements which have been arbitrarily established in order to adopt the Euro were called "nominal convergence criteria". Additionally, an undefined "real convergence" was claimed as an argument for postponing the replacement of the local currency with a regional one. This paper discusses this specific problem of economic convergence (real and nominal) as a prerequisite for being accepted as a member of a single currency area. We explain the (in)significance of such condition for the stability or optimality of this kind of monetary arrangement. [ABSTRACT FROM AUTHOR]

The work adopts an old Keynesian perspective to evaluate the EMU. Such a perspective raises concerns with the effectiveness of monetary policy, the feasibility of monetary policy, and the political economy of monetary policy. The EMU brings with it institutional lock-in, and therefore needs to be evaluated with a long term perspective. Whether or not to join the EMU depends on whether effective sovereign monetary policy is feasible now and in the future, whether the EMU constitutes an optimal currency area, and whether the proposed European Central Bank will have an appropriate institutional design. If formed, the EMU should create institutions which promote expansionary policies and empower the conduct of sovereign European monetary policy. JEL Codes: E5, F3, F4, F02 Keywords: European monetary union, European central bank, optimal currency area, sovereign monetary policy.

The work adopts an old Keynesian perspective to evaluate the EMU. Such a perspective raises concerns with the effectiveness of monetary policy, the feasibility of monetary policy, and the political economy of monetary policy. The EMU brings with it institutional lock-in, and therefore needs to be evaluated with a long term perspective. Whether or not to join the EMU depends on whether effective sovereign monetary policy is feasible now and in the future, whether the EMU constitutes an optimal currency area, and whether the proposed European Central Bank will have an appropriate institutional design. If formed, the EMU should create institutions which promote expansionary policies and empower the conduct of sovereign European monetary policy. JEL Codes: E5, F3, F4, F02

The parallels between the monetary politics of the gold standard and that of the eurozone crisis are striking and have informed contemporary debate about the future of European integration. The eurozone crisis has been widely interpreted as the result of a mismatch between international monetary integration and a concomitant lack of fiscal integration, or more broadly as the result of a European Union which is economically integrated, yet politically fragmented. The prospect of a 1930s-style descent into division and nationalism has formed the backdrop against which moves towards extensive integration at the supranational level have been made. Polanyi diagnosed the political effects of monetary integration through his analysis of the gold standard system inThe great transformation, making it important that we unpack his analysis and consider carefully how a Polanyian perspective might apply to the eurozone today. I argue that Polanyi encourages us to look beyond ‘monetary vs. fiscal’ and ‘economic vs. political’ characterizations of European integration, and instead to examine how such oppositions are formed in the first place and how they constrain political debate, particularly in terms of how ‘sound money’ is established as the highest policy concern. Through a re-reading of Polanyi's distinction between ‘all-purpose’ and ‘special-purpose’ money, I highlight how, despite the huge efforts undertaken to preserve the identity of the euro as an all-purpose currency, the eurozone crisis has rendered visible a series of latent conflicts between the different functions of money. This analysis moves us away from the ‘monetary vs. fiscal’ integration view of the eurozone crisis and towards a more open study of how the various possible purposes of money are being articulated and challenged, offering some limited hope for alternatives to the current eurozone policy agenda. [ABSTRACT FROM PUBLISHER]

This paper attempts to provide a comprehensive overview on the theoretical and empirical analysis of the selection and assessment of exchange rate regimes. The literature can be divided into two main groups: classical and modern. The first group refers to earlier studies examining the differences between floating and fixed exchange rate regimes. The second group is focused on the trade-off between credibility and flexibility, the economic performance and currency crisis, among others. In addition, this paper reviews why many countries follow de facto regimes different from their de jure regimes. [ABSTRACT FROM AUTHOR]

The recent financial crisis starting in 2007–2009 is the longest and the deepest recession since the Great Depression of 1930. The crisis that originated in the US subprime mortgage markets spread and amplified through international financial markets and resulted in severe debt crises in several European countries. Events revealed that the European Union (EU) had insufficient means to halt the spiral of the European debt crisis. The aim of this study is to identify the characteristics of a robust common fiscal policy framework that could have alleviated the consequences of the recent crisis. This is done by using the political and fiscal history of five federal states: Argentina, Brazil, Canada, Germany, and the USA. Our study suggests that a fiscal union is necessary to avoid divergent fiscal policies and we identify five conditions crucial for it to function effectively: (i) a credible commitment to a no-bailout rule, (ii) a degree of revenue and expenditure independence reflecting the preferences of the voters, (iii) a well-functioning European system of transfers in times of distress, (iv) the creation of a euro bond market serviced by taxes collected by the EU government, (v) the ability to learn from and adapt to changing economic and political circumstances. (JEL codes: H10, H70, H73) [ABSTRACT FROM AUTHOR]

In this paper, using the Taylor rule (Taylor, 1993), the European Central Bank (ECB) monetary policy in 2000-2012, as well as individual interest rate needs of the euro area (EA) countries are analysed. It is assumed that the estimated Taylor rule interest rates are optimal for individual members. We have analysed whether the actual ECB interest rates and the calculated rates are different and have become more balanced towards individual countries' needs. The work focuses attention on the last period (2008-2012) when the EA faced economic problems and an asymmetric shock. The analysis shows controversial results: on the one hand, the interest deviation mean decreases (just a little), but an increasing gap between individual needs can be seen: some countries are becoming increasingly divorced from the general EA needs. It makes them very vulnerable, and there is at risk that these countries in the face of asymmetric challenges can be "left behind" by the ECB focusing on the EA as a whole. Also, in this paper, the stationarity of the calculated deviations is analysed to help understand their nature. This approach is new, and the author is unaware of similar works. Analysis of the optimal interest rate dynamics has revealed that Germany needed the interest rates that were opposite to the needs of Spain and Greece and susceptible to divergence, so this led to the ECB difficulties in determining the proper interest for all countries needs. The EA as a currency area is most optimal for Belgium, Cyprus, Finland, France, Italy, and the Netherlands from the interest rate setting perspective. [ABSTRACT FROM AUTHOR]

Copyright of Research Papers of the Wroclaw University of Economics / Prace Naukowe Uniwersytetu Ekonomicznego we Wroclawiu is the property of Uniwersytet Ekonomiczny we Wroclawiu and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Ensayos Economicos is the property of Banco Central de la Republica Argentina and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Three theories or rationales can be invoked to explain the formation of the monetary union as well as its policy architecture. One sees its rationale as forming an optimal currency area, another as making macroeconomic policies credibly stability-oriented and a last one as overcoming collective action problems of mutually beneficial policy coordination. Each theory also implies an explanation for why the euro area is in crisis now. The article contains a critical assessment of these theories, with a view to how they have informed crisis management of the euro area but have also failed so far to stabilize the monetary union effectively. [ABSTRACT FROM PUBLISHER]

Many people think that the European Union is about the creation of the single market. It is not. After hundreds of years of internal wars and millions of deaths, of tyrannies playing on nationalism and division, we tried to build a different, united Europe. Although they are extremely relevant, the single market and the common currency are only two means to achieve the wider project. We are now facing the most serious threat to this construction. National egoisms and division are reappearing because of the uneven costs produced by the current crisis. We left the European construction to become a technocratic superstructure, with no real democratic accountability. National interests impeded significant shifts of sovereignty to EU democratic co-operative decisions. The viability of the euro construction depends on the political and institutional framework of the entire European Union. The peculiarity of the EU with respect to traditional models is to keep together sovereign states by means of international treaties whose objective is to produce gradual political, social and economic homogenisation. That path has not yet reached the stage where some significant form of federalism is possible. This obliges, now and in the near future, member states to match the common currency more with consistency than homogeneity. If we have to accept the imposition of more consistent policies, this does not mean that we have to focus solely on the fiscal compact, which will be selfdefeating. A Growth Compact, in addition to the Fiscal Compact, appears as the current preferable approach to tackle current problems and to give a viable perspective to Europe. [ABSTRACT FROM AUTHOR]

The euro area is experiencing a sovereign debt crisis; as a result, the foundations of its monetary union have been shattered. This crisis, which is an extension ofan international financial crisis, shows that the European Union is not an optimum currency area. Robert Mundell's work remains an indispensable reference on this subject: a monetary union among greatly different countries and animated by a weak solidarity is problematic. In the present context, the possibilities are limited for durably improving the situation, for transforming sovereign debts into sustainable ones, and for regaining a higher level of growth. Experience seems to show that a single currency cannot accommodate national budgetary policies and that national policies are hindered by the existence of a single currency in a context of asymmetries. Eventually, a scenario where the euro area would collapse becomes highly probable. This paper puts forward a model of debt sustainability and discusses eight related proposals. [ABSTRACT FROM AUTHOR]

Abstract: We argue the prospects of an Asian currency unit and an Asian currency union with a comprehensive survey of the literature, an empirical analysis and a study of the European Currency Unit''s (ECU) experience. Asian countries may meet optimal currency area conditions. However, many other factors along the dimensions of history, politics and economic structure should be addressed for the realization of currency unification. The ECU experience suggests that even a successful Asian currency unit requires firm political commitment and expectations of eventual currency unification. [Copyright &y& Elsevier]

The paper uses annual data on real GDP for 12 UK regions and 12 manufacturing sectors to derive regional and regional/sectoral business cycles using a Hodrick–Prescott filter. The cohesion of the cycles is examined via cross-correlations and comparisons made with the regional cycles for Japan, the USA and the euro area. The UK emerges as especially cohesive and efforts to explain the overall cross-correlations of regional GDP are not very successful owing to the low variance of the explicand; when attention is turned to the sectoral/regional cycles, with their greater variance, it is possible to demonstrate that economic variables such as distance, dissimilarity in structure and level of output play a significant role in explaining the variance in the cross-correlations. A significant feature of the cross-correlations in relation to those of EU countries is that while they continue to provide support for the ‘UK idiosyncrasy’ they no longer do so as strongly as they did in earlier data samples. Copyright © 2009 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]