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The big and bad error that caused European bad reaction to the financial crisis was the introduction of common currency. Eurozone does not form Optimum Currency
by Detrytus 3y ago
The big and bad error that caused European bad reaction to the financial crisis was the introduction of common currency. Eurozone does not form Optimum Currency Area, under Mundell's definition (https://en.wikipedia.org/wiki/Optimum_currency_area https://en.wikipedia.org/wiki/Optimum_currency_area), so any significant crisis is made worse by "asymmetric shocks".
- RandomLensman 3y agoI disagree with that, the policy errors where far more direct (and well analyzed). For example: poor bank recapitalisation, wrong incentives about balance optimization, ECB even raising rates in the beginning of the GFC