August 2012_issue_15
Multi-national monetary unions are rare; some regions debate them, but decide not to, preferring to retain independent monetary policy. Europe went ahead anyway, despite large differences between member countries. Just how different? Using the World Economic Forum Global Competitiveness Report, JP Morgan Asset Management wanted to fi nd out. Global head of investment strategy Michael Cembalest explained: “This compilation rates 142 countries on over 100 factors related to labour and goods market effi ciency, government institutions, macro-economic soundness, health and education, business sophistication and capacity for innovation. Using this data, I imagined what other monetary unions might exist, and how different their constituents would be. As shown, they all have less dispersion than the European Monetary Union. Still, Europe soldiers on, even as the rest of the world avoids monetary union in circumstances more favorable to it. What remains are political questions regarding how much infl ation and fi scal transfer Germany can sustain, whether a fi scal union can be created, and how much austerity countries like Spain can take. As this is a road less travelled, it’s hard to know how it will turn out.”
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