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Is Euro Area an Optimal Currency Area and What Barriers Could Obstruct Its Future Development?

Irena Vrnáková () and Hana Bartušková ()
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Irena Vrnáková: University of Economics, Prague
Hana Bartušková: University of Economics, Prague

ACTA VSFS, 2013, vol. 7, issue 2, 123-144

Abstract: European monetary integration has been a really ambitious project since the very beginning and during last decade it succeeded in many areas. The euro was launched without serious problems and since then the European Central Bank has managed to achieve a low inflation rate in the whole euro area. The European Union and the euro experienced the world economic crisis in 2008 and dealing with the impacts of this crisis was a real challenge for the EU, for all the member states, single monetary policy and the euro area and also for the whole integration process. In our paper we will proceed from the Optimal Currency Area model (OCA, developed by Robert A. Mundell, Peter Kenen and Ronald McKinnon) to conditions of the euro area and European currency integration process. The paper will summarize the OCA model and test the criteria for OCA in European conditions and identify barriers to the OCA as imperfect mobility of the labour market, an unfinished single market, insufficient coordination and cooperation in common macroeconomic areas within the euro area, asymmetric shocks and others. The findings will show us that euro area does not exactly meet majority of criteria for OCA model but due to strong political will of European states is the euro project going to continue. This paper also discuss the perspectives of European monetary integration.

Keywords: euro; euro area; monetary integration; European Union; Optimal Currency Area theory; single currency; single monetary policy (search for similar items in EconPapers)
JEL-codes: E42 N14 (search for similar items in EconPapers)
Date: 2013
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Handle: RePEc:prf:journl:v:7:y:2013:i:2:p:123-144