The optimum currency area. Convergence process in the EU

The paper analyzes the development of economic convergence in Member Countries of the European Union during the 2004–2012 period. Multivariate statistical methods (cluster analysis) and econometric methods (vector autoregressive models) for estimating the regression relationship between the relevant variables were employed in the analysis. These methods are applied to selected data for variables (criteria, such as labour force migration, openness of economies, symmetry of the business cycle position and so on) considered key for the successful functioning of the monetary union. The paper is bound in this respect to theoretical assumptions concerning the criteria which determine the so-called optimum currency area. Criteria are selected according to famous research papers, which occupy with this topic, mainly Mundell (1961), McKinnon (1963), Kenen (1969), Eichengreen (1991), Artis and Zhan (1998). Data for the convergence criteria for individual countries are obtained from the Eurostat, OECD, and IMF databases, or from the statistical offices of the countries under analysis. At its completion, the paper should provide answers to critical questions to do with economic-political integration within the European Union, primarily hypotheses regarding strengthening (or weakening) convergence trends within the EU, positive feedback from adoption of the euro on economic convergence and the objective identification of peripheral (in the sense of economically differentiated) economies. The findings produced may be formulated as objective arguments which, in concert with the theory of optimum currency areas, may recommend the countries in question become direct participants in the European Monetary Union or, by contrast, that they maintain or reintroduce their own national currencies.