Is the Eurozone not a monetary union, but an extraordinary exchange rate union?

Beate Sauer and Friedrich L. Sell

No 2013,2, Working Papers in Economics from Bundeswehr University Munich, Economic Research Group

Abstract: The Target imbalances within the Eurozone can be interpreted as a sign of a missing balance of payments adjustment mechanism for the member countries. As the Eurozone lacks a fiscal union, in economic theory it is more an exchange rate union or a system of fixed exchange rates than a monetary union. In the latter, there would not be any national balances of payments, but only one for the whole Eurozone. This paper will show why the Target System is a crucial indicator for the Eurozone not being a monetary union, but an exchange rate union and why countries holding Target liabilities against the European System of Central Banks can be compared to a reserve currency country, e.g. like the US during the Bretton-Woods-System.

Keywords: Target Imbalances; Balance of Payments Crisis; Balance of Payments Adjustment Mechanism; Eurozone; Fixed Exchange Rates; Fiscal Union (search for similar items in EconPapers)
JEL-codes: E40 E41 E42 E50 E52 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ubwwpe:20132

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