The Problem of Stability in the Euro‐Zone: Lessons from History and Economics

Kenneth Dyson

in The Politics of the Euro-Zone

Published in print September 2000 | ISBN: 9780199241651
Published online November 2003 | e-ISBN: 9780191599118 | DOI:
The Problem of Stability in the Euro‐Zone: Lessons from History and Economics

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This chapter seeks to analyse prospects for the Euro‐zone's stability in terms of comparative history and economic theory. It begins by comparing the Euro‐zone with earlier examples of national currency unification, and with the Bretton Woods system, focusing, in particular, on the formative experiences of the 20‐year period of the European Monetary System (EMS). The chapter goes on to discuss the meaning and sources of stability in economic theory, especially optimum currency area theory, neo‐liberal theory about labour markets, credibility theory, and ‘regulation’ theory. Particular attention is paid to the weaknesses of these theories in dealing with the crucial political dimension of Euro‐zone stability. It will be important for Euro‐zone stability that ECB and monetary policy planners do more than recognize that ‘politics matters’ for stability, and pay adequate attention to factoring political realities into their theories and models.

Keywords: Euro‐zone; monetary policy; stability

Chapter.  8859 words. 

Subjects: European Union

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