Lessons from historical monetary unions - is the European monetary union making the same mistakes?
John Ryan () and
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John Ryan: LSE IDEAS, London School of Economics and Political Science
John Loughlin: St Mary’s University Twickenham
International Economics and Economic Policy, 2018, vol. 15, issue 4, No 2, 709-725
Abstract This article examines three historical monetary unions: the Latin Monetary Union (LMU), the Scandinavian Monetary Union (SMU), and the Austro-Hungarian Monetary Union (AHMU) in an attempt to derive possible lessons for the European Monetary Union (EMU). The term ‘monetary union’ can be defined either narrowly or broadly depending on how closely it conforms to Mundell’s notion of ‘Optimal Currency Area’. After examining each of the historical monetary unions from this perspective, the article concludes that none of them ever truly conformed to Mundell’s concept, nor does the EMU. Nevertheless, the article argues that some lessons may be learned from these historical experiences. First, it is necessary that there exist robust institutions such as a common central bank and a unified fiscal policy in order to withstand external shocks. The three early unions could not withstand the shock of WWI. Another important lesson is that continuing national rivalries can undermine any monetary union.
Keywords: Latin monetary union; Scandinavian monetary union; Austro-Hungarian monetary union; European monetary union; Eurozone crisis; European Central Bank (search for similar items in EconPapers)
JEL-codes: E42 E50 E52 F02 F50 (search for similar items in EconPapers)
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