TITLE

Currency Unions: Some Lessons from the Euro-Zone

AUTHOR(S)
Goodhart, Charles A. E.
PUB. DATE
March 2007
SOURCE
Atlantic Economic Journal;Mar2007, Vol. 35 Issue 1, p1
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
Whilst there are many sizeable benefits from currency union, the main disadvantage is often the difficulty of adjusting to an asymmetric shock. Such adjustment is easier when the separate countries (regions) in such a union have flexible labour markets, and when there is a federal fiscal system to ease the adjustment process. The euro-zone has neither. We show that the trends in relative unit labour costs have in several recent cases been worsening relative competitiveness, thereby putting the euro-zone under greater centrifugal pressure. Nevertheless the costs of ‘exit’ are so high that it would only probably occur as a consequence of political mis-calculation.
ACCESSION #
24207945

 

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