Optimal Currency Area and European Monetary Membership: Economics and Political Economy

Donato Masciandaro () and Davide Romelli

No 1760, BAFFI CAREFIN Working Papers from BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy

Abstract: The recent Global Crisis are posing challenges to the stability of the European Monetary Integration process. The pillar of the European Monetary Integration is the evolution of the European Monetary Union (EMU). Being the EMU the establishment of a currency union, such as international agreement implies for the member countries the inability to use exchange rates and national monetary policy to deal with real and financial shocks. It is natural then to wonder under which conditions the net benefits of a currency union are likely to be positive, comparing the abovementioned limitations with the medium long term gains in having on the one side perpetual fixed exchange rates and on the other side the delegation of the monetary policy action to an independent and supranational central bank, i.e. the European Central Bank (ECB) that manages the European Monetary Union (EMU). A natural question arises: how to evaluate the economic pros and cons in having the EMU membership? The aim of this paper is to analyse the economics and the political economy of the EMU membership.

Keywords: OPTIMAL CURRENCY AREA; EUROPEAN MONETARY INTEGRATION; MONETARY POLICY; POLITICAL ECONOMICS (search for similar items in EconPapers)
JEL-codes: E03 E52 E58 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2017
New Economics Papers: this item is included in nep-mac and nep-mon
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