The European Monetary Union and OCA Theories: A Common Currency Awaiting a Real Economic Union

Abstract After a brief description of the functioning of the European Monetary System and its crisis, this chapter analyses the objectives and content of the Maastricht Treaty, including the convergence criteria for admission to the Economic and Monetary Union (EMU). The judgment on the EMU’s construction is made by considering the Optimal Currency Area theories. The chapter also includes an account of empirical evidence on ‘real convergence’ - which is juxtaposed to ‘nominal’ and ‘institutional’ convergence - in the Eurozone, compared with the European Union as a whole. The empirical investigation is completed by analysing cycle correlations, sensitivity to the average EU cycle and trade intensity.

Keywords European Monetary System (EMS) • Economic and Monetary Union (EMU) • Optimal Currency Area (OCA) theories • Real convergence • Nominal convergence • Institutional convergence

Notice that, according to the Maastricht Treaty, EMU stands for ‘Economic and Monetary Union’. This chapter is however chiefly devoted to the monetary union, and in Chap. 7 we shall emphasize what is still needed to realize a true economic union.

© The Author(s) 2017

E. Marelli, M. Signorelli, Europe and the Euro, DOI 10.1007/978-3-319-45729-1_2

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