World Financial Crisis As A Danger To The Existence Of The European Economic And Currency Union.

Abstract

The article deals with the question whether it is actually beneficial for a country to join such type of a union as the European Monetary Union (EMU) during the world financial crisis. The following questions have been touched upon in the article: whether actually the level of economic volatility affects the benefits from trade and if joining EMU stimulates economic stability in the country. A model of G. D. Dickinson, W. A. Mullineux was used. A correlation-regression model based on the OLS method was built in order to find out whether their theoretical model is valid in real conditions. It was determined whether the benefits of joining EMU depend on the volatility of the economy. In order to define this, the results in four countries were compared: in Greece, Italy, Germany and France during the period from 1991 to 2001 and from 2002 to 2008 (before switching to the euro and after). The following conclusions have been made: in general, the transition to the euro and joining EMU has positive implications for the economy of the country, and in fact, the benefits of joining the union have the similar effect on the volatility of the economy. The economic crisis has revealed the disadvantages of this union. Its future and existence will depend on the choice of future economic policy.