The regional impact of the single currency

Martin Hallet ()

ERSA conference papers from European Regional Science Association

Abstract: The essential feature of a monetary union is the irrevocable fixing of nominal exchange rates of participating countries? currencies. Regions, as sub-units of Member States, will not be directly affected by such a decision since they have - by definition - no access to nominal exchange rate changes or monetary policy which in any case should never have been instruments for economic stabilisation at the regional level. Indirectly, however, the reduction of transaction costs as provided by the euro will give all regions of participating countries better access to the Single Market and will affect regions? competitiveness. To the extent that transaction costs between previously different currency areas cease to exist within a single currency area, integration effects occur on goods, capital and labour markets. The so-called "New Economic Geography" gives some indications on the impact of integration on trade and investment, whereas integration effects on the labour market should be marginal. The impact will vary more between regions of different Member States rather than between specific types of regions. Regions in the small, open peripheral Member States participating in EMU are likely to have relatively greater integration effects than regions in the core Member States whose exchange rates with main economic partners have already been stable for a long time.

Date: 1998-08
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Citations: View citations in EconPapers (6)

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