OPTIMALITY OF THE EURO CURRENCY AREA AND RELATED ISSUES – OCA

About the project

The optimality of a currency area is a multidimensional research problem. The proposed project encompasses several interrelated topics and, by employing advanced econometric approaches, empirically examines multiple dimensions of the optimality of the euro area as a currency union, as well as their potential interconnections. Using various linear and nonlinear specifications of statistical tests, the project investigates the characteristics of inflation rates and inflation convergence among euro area member states. This research contributes to the ongoing debate on the effectiveness of a common monetary policy within the euro area. Given existing empirical evidence and the heterogeneity among euro area countries, it is reasonable to assume that monetary policy effectiveness is not uniform across all member states. To deepen the understanding of this issue, the analysis focuses on testing real convergence as well as convergence in unemployment rates. In the subsequent stage of the research, real convergence and convergence in unemployment rates are compared and potentially linked to inflation convergence. In addition, the analysis incorporates and controls for the effects of other variables identified in the existing literature as key determinants of inflation dynamics and inflation convergence. The research sample consists of 20 euro area member states. Accordingly, the analyses are conducted at the individual country level, at the level of subsamples of structurally similar countries, and across the full sample. 

Total project value: 60.000,00 EUR

Project duration: October 1, 2025 until September 30, 2029

Project holder: University of Zagreb, Faculty of Economics & Business

Contact

Project leader: Associate Professor Mile Bošnjak

E-mail: mbosnjak1@net.efzg.hr

Address: Faculty of Economics & Business – Zagreb

     Trg J. F. Kennedyja 6

     10000 Zagreb, CROATIA