The premises and assumptions of monetary integration in Europe against the background of the theory of optimum currency area

Tomasz Łyziak

Ekonomia journal, 2001, vol. 3

Abstract: The creation of the Economic and Monetary Union on the 1st January 1999 and the introduction of the common currency euro enlivened the discussion on the subject of the theory of optimum currency area and their practical applications. The opinions appeared that the countries of the euro zone do not fulfill the criteria of optimum currency area, and therefore the conducting of a uniform money policy and an irrevocably stiffening of the currency rates inside this area may considerably hinder the efficient functioning of the particular economies, especially in a situation of asymmetrical disturbances. This article presents against the background of the theories of international economic relations a historical outline of the process of economic integration in Europe. Moreover there are discussed criteria serving to evaluate the optimality of the currency area and also there are compiled the results of empirical research concerning the degree of fulfilling of these criteria by the Euroland countries. The conclusion of the article is the statement that within the euro zone there are economies to a different degree predestined to stiffen the rates of their currencies with respect to the euro and to resign from soverainty in the scope of money policy. The requirements of the optimum currency area are fulfilled to the largest degree by Germany, Austria and Belgium, to the least degree by Finland and Portugal, whereas the remaining countries of the Economic and Monetary Union are situated on intermediate position.

Date: 2001
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