How Functional is the Eurozone? An Index of European Economic Integration Through the Single Currency

Abstract

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.

Adopting the Euro will Cause an Increase in Prices: A Study on Inflationary Processes in Euro Area Member States

“…It was the most remarkable in Germany, which should be linked to the nation's expansive fiscal policy that was a consequence of its reunification. In the remaining member states of the then EU prices remained similar or fell (Byrne et al, 2010;Gros et al, 201;Lopez et al, 2012;Meller et al, 2012;Castañeda et al, 2017).…”

“…prior to 1999. That was why, at the aggregated level, the adoption of the single currency alleviated inflationary pressure (Boyko, 2014;Castañeda et al, 2017).…”