There is a growing debate about complementing the European Monetary Union by a more comprehensive fiscal union. Against this background, this paper emphasizes that there is a trade-off in designing a system of fiscal transfers ("fiscal capacity") in a union between members of different size. A...

Essentially, the impact of the currency union on member countries depends on whether the common currency area is optimal in the sense that the effect of the asymmetric shocks is small, Mundell (1961). Typically, researchers use VAR of different types to analyze the data. For robustness, we use...

We propose a new and time-varying optimum currency area (OCA) index for the euro area in assessing the evolution of the OCA properties of the monetary union from an international business cycle perspective. It is derived from the relative importance of symmetric vs. asymmetric shocks that result...