CURRENCY UNIONS, ECONOMIC-FLUCTUATIONS, AND ADJUSTMENT - SOME NEW EMPIRICAL-EVIDENCE

This paper examines the sources of disturbances to output in the Unite d States and a set of European Union Countries and analyzes labor mark et adjustment mechanisms in these two economic areas, Comparable data sets comprising one-digit sectoral data for eight U.S, regions and eig ht European countries are constructed and used to compare the degree o f industrial diversification and the relative importance of different sources of shocks to output growth. Both economic areas are found to b e subject to similar overall disturbances although a disaggregated per spective reveals some important differences. The major difference, how ever, is in labor market adjustment, Interregional labor mobility appe ars to be a much more important adjustment mechanism in the United Sta tes, which has a more integrated labor market than the European Union.