Is the Euro Working? The Euro and European Labour Markets
Additional contact information
Stephen Silvia: American University
International Finance from EconWPA
Now that four years have passed since the introduction of the euro as a commercial currency, it has become possible to assess many arguments made in the abstract during the 1990s about the implications of monetary union. This contribution does precisely that. In brief, the euro zone still falls short as an optimal currency area in most respects. In particular, an empirical analysis of labor-market developments shows no progress toward flexibility or integration. The findings undercut assertions that the euro will force a liberalization of labor markets, so that they can serve as the principal vector of adjustment in the new currency area. Instead, a “rigidity trap” has developed in the euro area—which consists of relatively tight monetary policy, forced fiscal consolidation, and the virtual elimination of the gap between the real and the nominal wage—making structural adjustment in labor markets more difficult.
Keywords: optimum currency area; monetary union; asymmetric shocks; wages (search for similar items in EconPapers)
JEL-codes: E42 F33 F41 J21 (search for similar items in EconPapers)
Note: Type of Document - pdf; pages: 22
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpif:0508007
Access Statistics for this paper
More papers in International Finance from EconWPA
Series data maintained by EconWPA ().