Stabilisation Cocktails for a Eurozone Crisis Solving Framework
Stabilisation Cocktails for a Eurozone Crisis Solving Framework

Summary/Abstract: As of late 2014, the eurozone still has yet to forge a path of sustained recovery, which means dismal conditions for many European citizens, especially in the periphery. Optimum Currency Area theory can be used to analyse single currency areas, yet not operational due to conceptual confusion. In this paper, a new conceptual paradigm that makes currency area theory useful to decision-makers is proposed. This paradigm relies on two prongs: on one side, a study of the deviations from an ideal currency area, and on the other, the stabilisation mechanism cocktails. Stabilisation mechanisms and their impact on different macroeconomic shocks are then presented in a table. The framework found in this article will be useful for conducting a constructive dialogue between eurozone members on the future of the currency union.

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