There is no doubt that countries forming the EU are different and therefore subject to asymmetric shocks. The question, however, is whether they are able to get more homogenous over time. There are two different views on the matter. The first one, the European Commission's view, is based on the assumption that trade among EU countries is mainly intra-industry trade, and therefore more trade openness leads to more symmetric shocks. The second one, the Krugman's view, states that trade integration leads to more inter-industry trade and to regional concentration of industrial activities and thus to more asymmetric shocks. Because entry to the European Monetary Union means a loss of country's monetary policy (which cannot be used to correct for asymmetric shocks anymore) it is important that a country in a monetary union is a subject to symmetric shocks.

Objectives:

The aim of the article is to analyze a county's intra-industry trade with other countries participating in the Single European Market and on the basis of the Grubel-Lloyd index to accept or deny the Krugman's specialization paradigm.

Data/Methods:

Sources of data: Eurostat database, OECD statistics, national statistical offices

Methods: Grubel-Lloyd index

Expected Results:

It is expected, that the Krugman's specialization paradigm will be denied for the EU countries, and therefore it could be assumed that more economic integration leads to more symmetric shock. Therefore new EU countries may be exposed to less asymmetric shocks in the monetary union the longer and more they are integrated with other EMU countries.