It Can't Happen, It's a Bad Idea, It Won't Last: U.S. Economists on the EMU and the Euro, 1989–2002

Lars Jonung () and Eoin Drea

Econ Journal Watch, 2010, vol. 7, issue 1, 4–52

Abstract: On the whole, the euro has, thus far, gone much better than many U.S. economists had predicted. We survey how U.S. economists viewed European monetary unification from the publication of the Delors Report in 1989 to the introduction of euro notes and coins in January 2002. U.S. academic economists concentrated on whether a single currency was a good or bad thing, usually using the theory of optimum currency areas, and most were skeptical towards the single currency. In contrast, Federal Reserve economists had a less analytical and a more pragmatic approach. Both groups adjusted their views as European monetary unification progressed. It is surprising that academic economists, living in and benefiting from the U.S. monetary union, were so skeptical of monetary unification in Europe. We explain the skepticism as resulting from the strong influence of the original theory of optimum currency areas; failure to see monetary unification as an evolutionary process; failure to identify pegged exchange rates, rather than floating rates, as the practical alternative to a single European currency; and the belief that the single currency for Europe was primarily a political project that ignored economic fundamentals.

Keywords: Euro; optimum currency area; European Central Bank (ECB); Economic and Monetary Union (EMU); Federal Reserve System; monetary unification; Europe; United States (search for similar items in EconPapers)
JEL-codes: B22 E42 E5 F02 F33 F41 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:ejw:journl:v:7:y:2010:i:1:p:4-52

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