Abstract
Much has been made of the importance of asymmetric shocks in arguing against European Monetary Union (EMU). But such shocks are entirely consistent with better monetary policy under EMU. A single money represents the perfect answer to asymmetric shocks coming from currency substitution. In addition, many asymmetric shocks cannot properly be handled through monetary policy; others will not be so because of information problems; still others because of policy mistakes. Some strategic factors also favor EMU if shocks are symmetric. Finally, doubts about the effectiveness of monetary policy in Europe should be kept in mind. On these numerous grounds, little weight can be assigned to criticisms of EMU based on mere asymmetry in the shocks.
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Mélitz, J. Assessing the costs of European monetary union. Atlantic Economic Journal 24, 269–280 (1996). https://doi.org/10.1007/BF02298431
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DOI: https://doi.org/10.1007/BF02298431