monetary union, as demands is redistributed from countries experiencing an
increase in output to countries experiencing a decrease in their activity. Within the
union, however, this element is extremely small. No plan is decided upon which
makes a symmetrical federal fiscal system work. On the contrary the Pact on
Growth and Stability puts boundaries on the public deficit (a maximum of 3%
deficit of the GDP). Within the EU there has thus always been a dilemma between
the wish to retain an autonomous fiscal policy at the national level and the desire
to give fiscal policy a more active role in the combat of the effects of slowdown in
demands e.g. as a consequence of a asymmetrical shock.
In summery, the eleven countries participating in the euro area from the beginning
of January 1st of 1999 all reaps microeconomic gains, but at the same time, they
have become exposed to the risk of some level of macroeconomic instability. The
theory of an optimum currency area lists some structural characteristics of
importance to the ability to maintain a balance between the costs and benefits of a
common currency. Bering the evidence of the initial eleven countries in mind
reveals a rather mixed picture of such a balance. There is no strong indication that
conforms the hypothesis that the euro area constitutes a perfect and fully -fledged
optimal currency area. On the other hand the establishment of the EMU in itself
can perhaps make the eleven different economies perform more unilaterally
according to the lines of exactly such an optimal currency area through changes in
behaviour (at the levels of households, firms as well of government).
Some empirical evidence
Giving an evaluation of the present stage of economic integration this could be
done from a micro- as well as a macroeconomic perspective as shown in Table 1.
In the following, we will expand further on the main findings of the table.
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