A case in which economists skepticism proved correct

That´s on the likely failure of the Euro, so I wonder what Lars Jonung (a Swede) and Eoin Drea (an Irish) think five years later, because in 2009 they wrote: “It Can’t Happen, It’s a Bad Idea, It Won’t Last: U.S. Economists on the EMU and the Euro, 1989-2002”. From the abstract:

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. In contrast, Federal Reserve economists had a less analytical and a more pragmatic approach. Both groups adjusted their views as European monetary unification progressed. It is surprising that academic economists, living in and benefiting from the U.S. monetary union, were so skeptical of monetary unification in Europe. We explain the skepticism as resulting from the strong influence of the original theory of optimum currency areas; failure to see monetary unification as an evolutionary process; failure to identify pegged exchange rates, rather than floating rates, as the practical alternative to a single European currency; and the belief that the single currency for Europe was primarily a political project that ignored economic fundamentals.

Ode to EuroPS: At AEI, Desmond Lachman has “Two questions for European policymakers



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