Macroeconomic schools, Optimal currency area, Economic policy and monetary union
Abstract
The paper contains two separate 'components'. The first is very broadly related to the question why and how macroeconomic theorists differ. It is argued that 4 different schools could be set out. The dividing lines are determined by the overall view on how well a full scale market system does function. At one end of the theoretical spectrum one finds the very market optimists, at the other end the 'old' keynesians who consider the market economic system as fundamentally unstable. In between we find New Keynesian economists and soft monetarists. Conclusions with regard to the benefits of the EMU are highly differentiated among the different Schools and by their views on the necessity of pursuing an active overall economic policy.
The other paper is about how well the theory of 'optimal currency areas' (OCA) as a tool for understanding the costs and benefits of the EMU fits into the different schools. Outside Europe many economists have accepted the OCA theory as a good starting point which, of course, is dismissed by the 'real business cycle economists' and 'fundamental Keynesians'. This split also explains some of the differences with regard to the conclusions on the EMU. The paper has no firm opinion on the relationship between researchers political stand and their choice of economic theoretical school.
