Introduction

In 1990, when European economists started discussing the economics of monetary union with policy-makers, they were at pains to explain to them what an asymmetric shock could look like; I had recently an occasion to listen to a French foreign affairs official who was almost routinely referring to the asymmetric shock problem. This is an indication of the progress in the policy debate on Economic and Monetary Union (EMU) we have been witnessing over the last few years, and an illustration of Tarn Bayoumi and Barry Eichengreen's (hereafter BE) view that research has come up with an adequate ‘framework for debate’ on the economics of European monetary union. As a large part of this progress can be attributed to their (joint or separate) research effort since 1990, it is a great pleasure to comment on a new chapter by them which aims to take stock of what has been achieved, to provide new empirical evidence, and to suggest new horizons for research. I will first discuss the survey section of the chapter, before turning to a discussion of the empirical section.

Some shortcomings in the operationalisation of OCA theory

Section 2 of chapter 7 provides a clearly structured, well balanced and very comprehensive survey of recent empirical research on the costs and benefits of forming a monetary union in Europe.