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Lessons from historical monetary unions - is the European monetary union making the same mistakes?

Ryan, John and Loughlin, John (2018) Lessons from historical monetary unions - is the European monetary union making the same mistakes? International Economics and Economic Policy. ISSN 1612-4804

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Identification Number: 10.1007/s10368-018-0416-8

Abstract

This article examines three historical monetary unions: the Latin Monetary Union (LMU), the Scandinavian Monetary Union (SMU), and the Austro-Hungarian Monetary Union (AHMU) in an attempt to derive possible lessons for the European Monetary Union (EMU). The term ‘monetary union’ can be defined either narrowly or broadly depending on how closely it conforms to Mundell’s notion of ‘Optimal Currency Area’. After examining each of the historical monetary unions from this perspective, the article concludes that none of them ever truly conformed to Mundell’s concept, nor does the EMU. Nevertheless, the article argues that some lessons may be learned from these historical experiences. First, it is necessary that there exist robust institutions such as a common central bank and a unified fiscal policy in order to withstand external shocks. The three early unions could not withstand the shock of WWI. Another important lesson is that continuing national rivalries can undermine any monetary union.

Item Type: Article
Official URL: https://link.springer.com/journal/10368
Additional Information: © 2018 The Author(s)
Divisions: IGA: LSE IDEAS
Subjects: H Social Sciences > HB Economic Theory
JEL classification: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E50 - General
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy (Targets, Instruments, and Effects)
F - International Economics > F0 - General > F02 - International Economic Order
F - International Economics > F5 - International Relations and International Political Economy > F50 - General
Sets: Research centres and groups > LSE IDEAS
Date Deposited: 16 May 2018 09:55
Last Modified: 20 Nov 2019 05:37
URI: http://eprints.lse.ac.uk/id/eprint/87955

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