The Case of European Monetary Integration and its Former Hegemon

2013 ◽  
Vol 14 (1) ◽  
pp. 2-14 ◽  
Author(s):  
Mojmír Hampl
Keyword(s):  
Integration Method ◽  
Monetary Integration ◽  
European Monetary ◽  
Currency Area ◽  
Convergence And Divergence ◽  
Set Up ◽  
Integration Project

Abstract There is no historical precedent for the institutional set-up of the eurozone. However, it is an arrangement that could not and cannot escape the universal laws and principles of economics. This article tries to look generally at the consequences of this integration project from the perspective of the former monetary hegemon, Germany, whose hegemony largely ended as a result of the monetary integration method chosen. Those consequences are, of course, more apparent in bad times than they were in good times. We then specifically examine the problem of convergence and divergence within a currency area and discuss the issue of competitive devaluation. In the conclusion, we try to formulate the fundamental dilemma faced by the former monetary hegemon. Its solution will affect those inside and outside the integration project.

scholarly journals Frankel and Rose’s Introduction to the Endogeneity of Optimality: A Model Limited to the European Monetary Experience

2021 ◽  
Vol 27 (2) ◽  
Keyword(s):  
Empirical Studies ◽  
Monetary Integration ◽  
Economic Convergence ◽  
Common Currency ◽  
European Monetary ◽  
Monetary Policies ◽  
Currency Area ◽  
Monetary Unification ◽  
Adjustment Mechanisms ◽  
Selection Of

This article discusses Frankel and Rose’s (1997, 1998) introduction to endogeneity, which was the result of scrutinizing the optimal currency area (OCA) theory through the evaluative lens of European monetary integration and unification in the 1990s. It cannot be generalized to another monetary union. The development of endogeneity interrelates five different criteria (common currency; transaction costs; commercial integration; economic convergence; and diversification of production) to argue that the introduction of a common currency leads to economic convergence among the participating countries. Frankel and Rose’s choice of analytic criteria arises from empirical studies on European monetary unification, following the OCA framework. The empirical studies found to have influenced the authors can be divided into three themes: the microeconomic benefits of a common currency; the optimality of European countries; and adjustment mechanisms. However, as shown by the selection of certain criteria, the influence of the Emerson report (1990), and the price-stability orientation of fiscal and monetary policies, their proposal only works within the monetary and economic conditions of the future eurozone area.

scholarly journals SOME THEORETICAL ASPECTS OF ECONOMIC INTEGRATION

2017 ◽  
Vol 7 (2) ◽  
pp. 97-105
Author(s):  
Alem Merdić ◽  
◽  
Hasan Mahmutović ◽  
Keyword(s):  
Free Trade ◽  
Economic Integration ◽  
European Monetary Union ◽  
Economic Benefits ◽  
Monetary Integration ◽  
European Monetary ◽  
Currency Area ◽  
Conceptual Definition ◽  
Definition Of ◽  
Benefits And Costs

One of the basic links of the process of globalization are economic integrations. The aim of this paper is to systematize theoretical achievements and to review the forms, effects and conditions for connecting countries motivated by economic benefits. In addition to the theoretical review of the conceptual definition of economic integration, the focus is on the levels of economic integration from the free-trade zone to the monetary and fiscal union, explaining the specificity of each of the mentioned levels. Considering that the connection between countries always raises the question of the benefits and costs of connection, the special emphasis in this paper is placed on the potential effects for free trade. Finally, the greatest contribution of this paper is the systematization and theoretical review of the theory of optimal currency area and monetary integration, which is especially significant for the European soil, taking into account the already established European Monetary Union.

scholarly journals Optimum currency areas, real and nominal convergence in the European Union

2015 ◽  
pp. 7-28 ◽  
Author(s):  
João Sousa Andrade ◽  
António Portugal Duarte
Keyword(s):  
Interest Rates ◽  
Monetary Integration ◽  
The European Union ◽  
European Monetary ◽  
Currency Area ◽  
Real Convergence ◽  
Convergence Process ◽  
Fractional Differential ◽  
Optimum Currency ◽  
Differential Process

It is well known and widely accepted by economists that the characteristics of the countries of the European Monetary Union (EMU) created in 1999 did not match the requirements of an Optimum Currency Area (OCA). The only criteria for membership of the EMU were nominal. A strict level of convergence in inflation and interest rates was imposed. In addition to the nominal convergence, a process of convergence of nominal and real incomes in the new monetary area was expected to be generated with the monetary integration. After summarizing the criteria for a successful currency area in the context of the OCA theory, we study the real and nominal convergence process for an older group of countries (11) to establish whether or not these countries satisfy the conditions of an OCA. We apply ADF tests, together with the Schmidt-Phillips tests, and we estimate the fractional differential process to overcome the disadvantages of the traditional tests, to test for nominal and real convergence. We conclude that a process of real divergence and nominal convergence does exist, and suggest this is a source of genuine imbalance in the European integration process that can destroy the harmonious development of the European Monetary Union.http://dx.doi.org/10.14195/2183‑203X_42_1

Analysis of the Economic Impacts of the Euro, the Efficiency of the Euro in the Optimum Currency Area, and the Place of the Euro in Global Economics

2020 ◽  
Vol 28 (2) ◽  
pp. 258-275
Author(s):  
Hüseyin Özdeşer
Keyword(s):  
Financial Markets ◽  
Inflation Rate ◽  
Economic Impacts ◽  
International Markets ◽  
Monetary Integration ◽  
European Monetary ◽  
Dominant Position ◽  
Currency Area ◽  
Optimum Currency ◽  
The Eu

The introduction of the euro has led to three dominant currencies in the financial markets, namely the euro, dollar and yen. The use of the euro as the single currency is a key element for economic and political unification in the EU (European Union). While some of the criteria for achieving monetary integration between the European Monetary Union (EMU) member countries in the euro area have been satisfied, some problems still remain. As the euro is not the currency of a single country like the dollar, the dollar still retains its dominant position in the international markets. After the Brexit referendum, apprehension regarding the collapse of the EU has reached a peak. Originally introduced in 12 EU member countries, and since extended to 19, the euro may potentially embrace 27 member countries. In this study, the economic impacts of the euro on the per capita income, inflation rate and foreign direct investment are analysed. The analysis will be performed on three countries participating in the EMU, namely, Germany, France and Italy.

The Effect of Membership in the European Monetary Union on Trade Between Member Countries (An Empirical Study)

2006 ◽  
Author(s):  
Ihor Soroka
Keyword(s):  
Monetary Union ◽  
European Monetary Union ◽  
Bilateral Trade ◽  
Trade Agreement ◽  
Monetary Integration ◽  
European Monetary ◽  
Trade Relations ◽  
Euro Adoption ◽  
Short Period ◽  
Short Run

The question of whether or not to adopt the euro is a very important one, not only for the 13 European Union members that do not share the same currency, but also for future EU candidates. Current literature on the effect of the euro on trade is scarce since the European Monetary Union (EMU) was officially created in 1999, and up until recently there has not been enough data to analyze this issue. This paper aims to estimate the effect of the euro on trade between member countries using the standard gravity model of trade. Using data from current 25 EU members over the period from 1997 to 2004, I show that higher trade volumes between EMU members cannot be attributed to the adoption of the euro. I find evidence that the euro adoption has had a short-run effect on bilateral trade and that this effect is eliminated over a short period of time. My findings suggest that members of the EMU trade on average from 8.8% to 47% more compared to non-members depending on the type of regression used, while members of the Free Trade Agreement trade 61.3% more. The effect of the euro on trade is eliminated as soon as I control for country-pair specific effects that include the FTA effect as well as history of trade relations between two countries. I conclude that the adoption of the euro should be seen as a final step in the European economic and monetary integration for countries that already benefit from relatively high volumes of bilateral trade. Full text availale at: https://doi.org/10.22215/rera.v2i1.166

Monetary Integration, Fiscal Divergence and Current Account Imbalances in Europe

2018 ◽  
Vol 15 (1) ◽  
Author(s):  
Gunther Schnabl
Keyword(s):  
Fiscal Policy ◽  
Monetary Union ◽  
Current Account ◽  
European Monetary Union ◽  
Exchange Rate Regime ◽  
Early Years ◽  
Monetary Integration ◽  
Fiscal Policies ◽  
European Monetary ◽  
Panel Regressions

Abstract The paper scrutinizes the role of diverging fiscal policy stances for diverging current account positions in Europe with a focus on the European Monetary Union (EMU). In a heterogeneous monetary union fiscal policy has the task to absorb asymmetric shocks to ensure the efficacy of the one-size monetary policy. It is argued that since the early years of the European Monetary Union divergent fiscal policies combined with monetary expansion constituted a major determinant of current account divergence within the euro area, which finally led into the European debt and financial crisis. Panel regressions reveal a significant impact of fiscal policies on current account positions, which to a large extent are independent from the exchange rate regime and turn out to be contingent on monetary and fiscal policy mix. Based on the findings economic policy recommendations are presented.

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