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How Functional is the Eurozone? An Index of European Economic Integration Through the Single Currency
Author(s) -
Castañeda Juan E.,
Schwartz Pedro
Publication year - 2017
Publication title -
economic affairs
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.24
H-Index - 18
eISSN - 1468-0270
pISSN - 0265-0665
DOI - 10.1111/ecaf.12262
Subject(s) - currency , index (typography) , economics , european debt crisis , single currency , optimum currency area , work (physics) , international economics , currency crisis , financial crisis , european integration , monetary economics , macroeconomics , european union , computer science , mechanical engineering , world wide web , engineering
This article is a step towards empirically assessing how close the Eurozone is to becoming an ‘optimal currency area’, as originally defined by Mundell ([Mundell, R., 1961]). 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.