"Has the EU become an OCA? Evaluation using model-based cluster analysis"

Crowley, Patrick M. (2003) "Has the EU become an OCA? Evaluation using model-based cluster analysis". In: UNSPECIFIED, Nashville, TN. (Unpublished)

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Abstract

This paper, rather than discussing the political and economic merits or otherwise of EMU, seeks to evaluate which member states, potential member states, and other European countries might be most suited as candidates for EMU, in the sense that 1) synchronicity of business cycles with Germany is achieved, and 2) countries have similar experience with movements in interest rates, inflation and unemployment. Unlike with optimal currency area considerations, both labor mobility and trade intensity are ignored, as labor mobility is rather small in the EU, and although trade intensity clearly matters for the possibility of achieving convergence (usually through the endogenous Optimum Currency Area route), there is a considerable amount of debate in the economics literature as to the nature and size of the relationship between a single currency and the growth of trade.

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