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2015/2016  BA-BHAAV3007U  The Economics of the Euro

English Title
The Economics of the Euro

Course information

Language English
Course ECTS 7.5 ECTS
Type Elective
Level Bachelor
Duration One Semester
Start time of the course Autumn
Timetable Course schedule will be posted at calendar.cbs.dk
Max. participants 50
Study board
Study Board for BSc in Economics and Business Administration
Course coordinator
  • Svend Erik Hougaard Jensen - Department of Economics (ECON)
Main academic disciplines
  • Economics
Last updated on 24-11-2015
Learning objectives
To achieve the grade 12, students should meet the following learning objectives with no or only minor mistakes or errors: Upon the end of the course, the students will be able to:
  • Understand the historical background to European monetary integration.
  • Identify the pros and cons of forming a common currency
  • Discuss the need for fiscal rules to constrain governments en members of a monetary union
  • Understand the role of financial markets to provide reliable information to fiscal authorities
  • Understand the background to the sovereign debt crisis in Europe
  • Discuss the room for manoeuvre to the European Central Bank
  • Explain various scenarios if the euro collapses and national currencies are reintroduced.
  • Relate the challenges of the euro area to other parts of the developed world, primarily the US and JApan
Course prerequisites
Basic knowledge of microeconomics, macroeconomics and international economics.
4-hour written sit-in exam:
Exam ECTS 7,5
Examination form Written sit-in exam
Individual or group exam Individual
Assignment type Written assignment
Duration 4 hours
Grading scale 7-step scale
Examiner(s) One internal examiner
Exam period Winter
Aids allowed to bring to the exam Limited aids, see the list below:
  • Allowed dictionaries
  • Allowed calculators
Make-up exam/re-exam
Same examination form as the ordinary exam
If the number of registered candidates for the make-up examination/re-take examination warrants that it may most appropriately be held as an oral examination, the programme office will inform the students that the make-up examination/re-take examination will be held as an oral examination instead.
Course content and structure

This course offers a detailed account of the process towards economic and monetary union in Europe. After a short introduction into the history and an overview of the major institutions of the European Union, we will discuss the theoretical foundations of an economic and monetary union. Then we study the key monetary and fiscal policy arrangements in the euro area, including the European Central Bank and the Stability and Growth Pact. In the final part, we will evaluate the performance of the euro area in light of accumulated evidence over the past decade, and we will look ahead in order to provide an assessment of the risks and opportunities of the euro area.

  • Part I: History, facts and institutions
    • History (BW, ch. 1)
    • Facts, law, institutions and the budget (BW, ch. 2)
    • Decision making (BW, ch. 3)


  • Part II: Costs and benefits of a monetary union
    • The Costs of a common currency (DG, ch. 1)
    • The theory of optimum currency areas: A critique (DG, ch. 2)
    • The benefits of a common currency (DG, ch. 3)
    • Costs and benefits compared (DG, ch. 4)
    • Optimal currency areas case studies: Is the enlarged European Union an optimal currency area? Is Latin America an optimal currency area? (DG, ch. 5)


  • Part III: The European Monetary Union
    • Incomplete monetary unions: The European Monetary System, dollarization (DG, ch. 6)
    • The transition to a monetary union: Problems of transition in Central Europe, problems of transition of the UK (DG, ch. 7)
    • The European Central Bank (DG, ch. 8)
    • Monetary policy in the euro area (DG, ch. 9)
    • Fiscal policies in monetary unions (DG, ch. 10)
    • The euro and financial markets (DG, ch. 11)


  • Part IV: Extensions (topics and material may be decided together with the students)
    • The European sovereign debt crisis
    • Is the fiscal compact an ideal framework for the conduct of fiscal policy in the euro area?

Enlargement of the euro area

Teaching methods
Further Information

Schedule: Friday 11.40-14.25, week 36-41,43-48.
Changes in schedule may occur.

Expected literature
  1. Baldwin, Richard and Charles Wyplosz (2012), The Economics of European Integration, 4th Edition, McGraw-Hill Education (denoted by BW in the following).
  2. De Grauwe, Paul (2012), Economics of Monetary Union, 9th Edition, Oxford University Press (denoted by DG in the following).
  3. Blanchard, O. and D. R. Johnson (2013), Macroeconomics, Pearson. Chapter 9.
  4. Merler, S. and J. Pisani-Ferry (2012), “Sudden Stops in the Euro Area”, Bruegel Policy Contribution, Issue 2012/06, Brussels.
  5. The Economist (2012), “Breaking Up the Euro Area: The Merkel Memorandum”, August 11-17, London.
  6. Peterson-Pew Commission on Budget Reform (2010), “Getting Back in the Black”, November, Washington DC.
  7. Hughes Hallett, A. and Svend E. Hougaard Jensen (2012, “Fiscal Governance in the Euro Area: Institutions vs. Rules”,Journal of European Public Policy, 2012, vol. 19, pp. 646-664
Last updated on 24-11-2015