Monetary Integration in the European Union

Abstract

This article compares the degree of monetary integration in the European Union countries, divided into two groups: the Eurozone countries and the new members. The motivation of the study is the need of alternative adjustment mechanisms in the eventuality of asymmetric shocks. We compare the situation of the new members with the Eurozone, focusing on covered and uncovered interest parity conditions and employing cointegration methodologies. Austria, Belgium, France and the Netherlands are the countries displaying stronger evidence of monetary integration. The Czech Republic shows little evidence of monetary integration, while Hungary and Poland do not show any evidence.