In the crisis years, the Euro project was thrown in to doubt and many questioned whether it had the ability to survive as a system. An economic area comparable in size and population to the Eurozone is the United States and therefore provides further insight to the analysis. However, we should note that the US is a long established monetary area (more than 150 years), with both a fully functioning banking and fiscal unions; this means that the US has a more integrated fiscal and financial system able to address lateral shocks affecting different regions within the US. With these caveats in mind, an interesting note is the level of dispersion in the US compared to the Eurozone. Taking overall dispersion excluding Fedwire balances, 2008 saw an increase to 193.27, yet within a short time frame, the level had decreased to an almost exact base-year level of 99.87 in 2010. This contrasts with the Eurozone, as in 2008 overall dispersion (without Target2 balances) was higher than the US level at 228.78 and by 2010 it increased to 578.93. This shows the sheer size of asymmetries among Member States in the Eurozone as compared to the US and also the greater degree of persistence in dispersion in the Eurozone, which is yet to return to pre-crisis levels of dispersion.
Note: We adopt 1999 as the base year for both economies in order to compare their performance since then, therefore focusing on changes in asymmetry. This does not mean that the level of asymmetries in both areas in 1999 was the same. In both cases we have displayed the overall index of dispersion without including the Fedwire and Target2 balances for the USA and the Eurozone economies, respectively.
If we look into dispersion in different categories, we observe that:
(1) Monetary dispersion in the US (including Fedwire balances) in 2008 was 308.77, two years later in 2010 it decreased to 221.69 (a change of -28.2%) and by 2016 it was in line again with 1999 levels at 100.33. This shows the ability for the USD to deal with financial shocks (such as the Global Financial Crisis) and recover at a better ability than the Euro, as the Eurozone figures for monetary dispersion (including Target2 balances) are still very far from their pre-crisis levels.
(2) Regarding competitiveness dispersion, for the US, dispersion is relatively stable from the years 1999-2015; even during the crisis years there was relatively little dispersion: take 2008-09, which shows an increase of 8.68 (+7.94%) from 109.30 to 117.98. Further to this, 2010 shows a 0.85 (-0.72%) decrease (to a value of 117.13). In fact, competitiveness only begins to rise slightly after 2015 with figures ranging from 131.33 (2017) to the highest level of 179.78 (2018). Yet, in the Eurozone, figures have been in the 1,000s since 2010, reaching a figure of close to 2,000.
(3) As per the business cycle dispersion in the US, the trends are rather similar in both economies; in the US we observe an increase in dispersion in the crisis years (from 122 in 2008 to 159 in 2012), but a decreasing trend in dispersion since then, very similar to that observed in the Eurozone after the ‘euro crisis’ years. In both economies cycle dispersion is even smaller now than in 1999.
However, since 2015 the indices seem to exhibit signs of improvement. The new fiscal measures adopted by the EU, along with the adjustment in prices by Member States which were affected the most by the Global Financial Crisis and the Euro Crisis, seemed to have been effective in creating closer economic integration. Additionally, the Quantitative Easing programme performed by the European Central Bank, which commenced in 2015, helped to offset monetary dispersion across Member States.