One Size Fits Some: A Reassessment of EMU’s Core–periphery Framework jei Journal of Economic Integration jei Vol.31 No.2, June 2016, 377~413 http://dx.doi.org/10.11130/jei.2016.31.2.377 One Size Fits Some : A Reassessment of EMU’s Core–periphery Framework Marcus Wortmann Georg-August-University Göttingen, Göttingen, Germany Markus Stahl Georg-August-University Göttingen, Göttingen, Germany Abstract This study provides a new multivariate assessment of core–periphery structures within the European Union. By applying different cluster algorithms to the broad set of Macroeconomic Imbalance Procedure indicators, we detect a relatively stability-oriented and homogeneous group of European Union core countries that would be suitable for having a common currency. Unlike previous results, our analysis shows that countries such as the United Kingdom, Denmark, and Sweden would also fit well within such a hypothetical euro area. However, Greece, Ireland, Italy, Portugal, and Spain plus Cyprus and Croatia on the southern periphery, as well as most of the countries of the eastern enlargement are found to form very distinct clusters in terms of competitiveness, indebtedness, and economic performance. Our findings thus reveal that a single monetary policy can be appropriate only for some countries, even when measured using the official Macroeconomic Imbalance Procedure scoreboard specifically designed to monitor the smooth functioning of the Economic and Monetary Union. * Corresponding Author: Marcus Wortmann; Georg-August-University Göttingen, Platz der Göttinger Sieben 3, 37073 Göttingen, Germany; Tel: +49 (0) 551 39 7355, Fax: +49 (0) 551 39 7093, E-mail:
[email protected] goettingen.de.