Core and Periphery in EMU: a Cluster Analysis
(with W. Zhang)Abstract
The paper looks for inhomogeneities in the actual and prospective membership of the EMU by applying techniques of hard partiioning (cluster analysis) to a set of variables suggested by the theory of Optiomal Currency Areas. The analysis reveals that the member countries may be divided into those belonging to the core (Germany, France, Austria, Belgium and the Netherlands) or to one of two peripheries, Northern or Southern (respectively, the Scandinavian countries, the UK and Ireland; and Greece, Spain, Italy and Portugal). These groups appear to be relatively well-defined; if the criteria of OCA theory are taken seriously this correspondingly implies a potential threat to the sustainability of the Union.
JEL Classification Number: C14, E32, F15, F31
Keywords: Optimal currency area, EMU, Cluster analysis.
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