Membership of EMU: A Fuzzy Clustering Analysis of Alternative Criteria

Abstract

The paper applies fuzzy clustering techniques to the member countries of the European Union in order to arrive at an identification of preferred monetary union groupings. The statistical criteria employed are those suggested, alternatively, by the traditional Optimal Currency Area theory or the Treaty of Maastricht. Both criteria sets identify well-identified sub-groups, where a distinction can be made between a ``core group'' and one or more peripheral goups. Despite some differences, the similarity between the groups distinguished by the alternative sets of criteria is quite striking. On the whole this is good news for the sustainability of the current ``Euro-zone''.