Lars Jonung on euroskepticism

22 Jul, 2015 at 09:23 | Posted in Economics | 4 Comments

On the whole, the euro has, thus far, gone much better than many U.S. economists had predicted. We survey how U.S. economists viewed European monetary unification from the publication of the Delors Report in 1989 to the introduction of euro notes and coins in January 2002. U.S. academic economists concentrated on whether a single currency was a good or bad thing, usually using the theory of optimum currency areas, and most were skeptical towards the single currency …

EU_1937355c-400x249We suggest that the use of the optimum currency area paradigm was the main source of U.S. pessimism towards the single currency in the 1990s. The optimum currency area approach was biased towards the conclusion that Europe was far from being an optimum currency area. The optimum currency area paradigm inspired a static view, overlooking the time-consuming nature of the process of monetary unification. The optimum currency area view ignored the fact that the Europe was facing a choice between permanently fixed exchange rates and semi-permanent fixed rates. The optimum currency area approach led to the view that the single currency was a political construct with little or no economic foundation. In short, by adopting the optimum currency area theory as their main engine of analysis, U.S. academic economists became biased against the euro.

It is surprising that U.S. economists, living in a large monetary union and enjoying the benefits from monetary integration, were (and still remain) skeptical towards the euro. U.S. economists took, and still take, the desirability of a single currency for their country to be self-evident. To our knowledge, no U.S. econ- omist, inspired by the optimum currency area approach, has proposed to break up the United States into smaller regional currency areas. Perhaps we should take this as a positive sign for the future of the euro: in due time it will be accepted as the normal state of monetary affairs in Europe just like the dollar is in the United States.

Lars Jonung & Eoin Drea

Hmm. I somehow think there’s something missing here …



  1. “Hmm. I somehow think there’s something missing here …”


    • Spot on! 🙂

  2. Har alltid hållit Lars Jonung högt. En revidering är på sin plats!

  3. This cannot be serious? You have a currency union without a means to recycle surpluses from productive economies that dictate economic rules through non-democratic processes. In the U.S., the richer and more productive states subsidize the less productive poorer states through a vast array of federal subsidies (food stamps, medicare, federal government spending and employment). I suspect that we in the US would not be so skeptical of the success of the Euro if you had a means to handle the Greek situation without causing a humanitarian crisis in a developed country.

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