Kenen on the euro | vox - 0 views
-
Early work on optimum currency areas by Robert Mundell had emphasised the symmetry or asymmetry of disturbances hitting different regional economies as a key criterion on which to gauge their suitability for sharing a common currency.
-
Peter took this insight further by arguing that disturbances were often sector specific and that the diversification of regional economies was therefore a key consideration in gauging their suitability for monetary union (the better diversified an economy was, the less likely it was to be badly destabilised by a sector-specific shock). (Kenen 1969).
-
We now know that Kenen flagged a problem for which the Eurozone could have been better prepared. With an outsized capital-goods producing sector, Germany benefitted from a strong positive shock as a result of China’s emergence onto the global stage, given the Chinese economy’s voracious appetite for capital goods.
- ...5 more annotations...