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Journal of Economic Integration 2016 June;31(2) :377-413.
DOI: https://doi.org/10.11130/jei.2016.31.2.377
One Size Fits Some
: A Reassessment of EMU’s Core–periphery Framework
Marcus Wortmann and 
Markus Stahl 
Georg-August-University Göttingen, Göttingen, Germany
Corresponding Author: Marcus Wortmann ,Tel: +49 (0) 551 39 7355, Fax: +49 (0) 551 39 7093, Email: marcus.wortmann@wiwi.uni-goettingen.de
Copyright ©2016 Journal of Economic Integration
ABSTRACT
This study provides a new multivariate assessment of core–periphery structures within the European Union. By applying different cluster algorithms to the broad set of Macroeconomic Imbalance Procedure indicators, we detect a relatively stability-oriented and homogeneous group of European Union core countries that would be suitable for having a common currency. Unlike previous results, our analysis shows that countries such as the United Kingdom, Denmark, and Sweden would also fit well within such a hypothetical euro area. However, Greece, Ireland, Italy, Portugal, and Spain plus Cyprus and Croatia on the southern periphery, as well as most of the countries of the eastern enlargement are found to form very distinct clusters in terms of competitiveness, indebtedness, and economic performance. Our findings thus reveal that a single monetary policy can be appropriate only for some countries, even when measured using the official Macroeconomic Imbalance Procedure scoreboard specifically designed to monitor the smooth functioning of the Economic and Monetary Union.

JEL Classification
C38: Classification Methods; Cluster Analysis; Factor Models
F15: Economic Integration
F45: Macroeconomic Issues of Monetary Unions
O57: Comparative Studies of Countries
Keywords: Economic and Monetary Union | Macroeconomic Imbalance Procedure | Economic Integration | Macroeconomic Disparities | Cluster Analysis
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