European Fiscal Federalism (Part 2): OCA theory and the effects of asymmetric shocks

The first part of the comment described in the previous post belongs to a part of economics which is highly relevant for the Euro area, known as OCA (Optimum Currency Areas), their characteristics and their behaviour when faced with internally asymmetric (-like) economic shocks. Charles Wyplosz and Richard Baldwin have an extremely good book on the economics of the EU, which discusses this at length. DeGrauwe's book has a somewhat more superficial dicussion of a similar scenario, focused on the interest rate, while von Hagen and Mundschenk elaborate more thoroughly on a scenario closer to DeGrauwe's. Finally, Beetsma, Debrun and Klassen also provide some insights. The scenario discussed below is inspired by Baldwin and Wyplosz' but I've added some details.