Monetary Union and the Economic Geography of Europe

Abstract

Abstract Monetary union is likely to change the spatial structure of economic activity in the EU. This article reviews what is known about these effects and discusses the implications for EMU. We argue that EMU is likely to promote a modest increase in specialization amongst EU countries, although industry‐specific shocks are sufficiently small for this not to pose further difficulties for macroeconomic management. Improvements in market access are likely to raise income levels in insiders relative to outsiders. Taking a very long‐term view, the urban structure of the EU might be expected to become more polarized, developing a steeper size distribution.

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