The European Monetary Union

Abstract

"Drawing on selected publications, this report provides an overview of the consequences a common currency could have on employment and earnings in Europe. The following effects are conceivable or probable: The transaction costs in the movement of European goods and capital and the uncertainties of the future exchange rate development would be reduced with the introduction of a common currency. This could positively stimulate growth and in turn employment in Europe. At the same time sudden slumps in production and employment in individual countries could no longer be compensated for by exchange rate adjustments against other European countries. Hence, the adjustment burden in such cases would have to be shouldered to a greater degree by the labour markets. Labour migration, for one, and an increased flexibility in earnings, for another, could conceivably bring about adjustments. The problems involved in both alternatives are discussed. The currency union could probably affect the existing regional development differences within the EU, although it is still rater unclear as to whether the disparities would be augmented or lessened." (Author's abstract, IAB-Doku) ((en))

Cite article

Rhein, T. (1995): The European Monetary Union. Possible consequences for employment and earnings. In: IAB Labour Market Research Topics No. 14, p. 1-13.