The effects of EMU on euro area unemployment

The author analyzes the likely impact of EMU and the associated changes in the monetary, economic, and institutional environment on European labor markets in an open economy model. He shows that in this model, the formation of a monetary union (MU) has no effect on unemployment if the participating countries were part of a fixed exchange rate regime before entering the MU and if the monetary policy of the common central bank resembles that of the former anchor bank. In addition, he discusses various cases in which this conclusion does not hold and where one can expect an impact of EMU on structural unemployment.