From Adoption to Integration: The Eurozone's Influence on European Markets No matter if you want to grab some ice cream on a sunny day, run to the supermarket to grab a drink, or have lunch with your friends, chances are you use the Euro. This is, of course, if you are within the European Union, more specifically, the Eurozone. This “zone” spans 20 EU countries and forms the EU’s monetary union. Often overlooked by many, it allows you to enjoy life without much hassle and the need to convert to any other currency if you are traveling. Your day-to-day tasks, services, food and drinks, and more are all paid for in euros within the Eurozone. The Eurozone celebrates its 25th anniversary this year, and the euro is continually developing as one of the largest currencies in the world. Originally, even before the effective circulation of the Euro as a currency, it was legally set in stone within the Treaty of Maastricht in 1992 whereby all EU countries were obliged to adopt the Euro as their universal currency in due time, once compliant with all fiscal and monetary benchmarks set out in the Convergence Criteria. Fast forward some 25 years, the  Eurozone seems to hold the confidence of its users and the foreign exchange market. Even IMF data shows that of the global currency reserves held cumulatively by all countries, the Euro holds a 20% stake, putting it in second place right behind the US Dollar. However, not all EU states have adopted the Euro yet. Most recently, Croatia joined the Eurozone in 2023, marking the 20th EU Member State to have joined. This implies that 7 of them have not yet adopted the Euro. The reasons vary, from political unwillingness to fiscal criteria remaining unfulfilled. With global geopolitics becoming unstable and other threats like pandemics on the horizon, the stability of currencies is put into question. Whether or not it is economically viable for potential Eurozone members to join remains up for debate. This leads to several key questions, mainly: how can EU members ensure their participation leads to a bright future with higher welfare for all citizens of the European Union? The Euro has been widely successful in its growth and circulation for several key monetary reasons. Consisting of members including Austria, Belgium, Croatia, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain, it has managed to attain the wide use of the populations of those countries making the effective daily user figure an astounding 341 million. This daily use inspires further confidence in the currency and its potential, as people and companies can maintain their connection and minimize foreign exchange fees, ultimately presenting a positive effect on the volume and flow of economic transactions taking place within the EU. Petroulas (2007) finds that there was an increase in inward foreign direct investment (FDI) of 16% in the Eurozone area following the introduction of the Euro. One added benefit of joining the Eurozone is the Euro Privilege. This refers to the statistically significant tendency of credit rating agencies such as Standard & Poor’s, Moody’s, and Fitch which would upgrade the country’s rating in the range of 0.3 to 0.6 notches before the financial crisis of 2008 and even 1 to 1.5 after it. This points to a significant positive credit rating as a result of joining the Eurozone. It is visible that Euro adoption was a common strategy and a very beneficial one for all involved. Despite the mass success the Eurozone has had, several EU states remain outside the Eurozone. These states include Romania, Bulgaria, the Czech Republic, Poland, Hungary, and Sweden. One additional state not yet in the monetary union is Denmark whose membership in the Eurozone is not obligatory due to them negotiating an opt-out. What most of these states have in common is their political unwillingness to adopt the currency, mainly due to the issue of losing the monetary policy and control mechanisms usually at the disposal of every individual state’s government. This theoretically allows them to adapt to crises and state-specific fiscal issues such as inflation. Furthermore, it allows for a stable and planned approach of governments in line with their specific national strategies for growth and development. De Grauwe (2011) argues that the danger comes from the inability of countries to issue sovereign bonds to guarantee they will have the necessary liquidity to pay off the bonds at maturity, as this is outside their scope of control. This, indeed, pushes towards a self-fulfilling liquidity crisis, potentially forcing the state to default. Under the monetary system of states with their national currencies, investors need not worry as the central banks are always there to introduce a monetary inflow in times of need. The peculiar thing, according to De Grauwe and Ji (2022), is that in the years leading to the financial crisis of 2008, the bond yields of Eurozone countries all had a near-perfect strong positive correlation with each other. This meant investors’ perception of the riskiness of bonds was equal for all Eurozone members despite the intricacies of each country's fiscal policies and state of affairs. It seemed as if the Euro by its existence and implementation, created unprecedented confidence. However, leading up to the financial crisis, a sudden change was to be noticed where investors questioned their risk exposure, thus opting to funnel their capital from weaker economies, such as Greece’s, to more stable ones, such as the Netherlands’ and Germany’s perceived as safer. This meant the bond yields of developed Eurozone members decreased while Greece’s sharply increased, to account for more risk exposure (See Figure 1). This led to their financial instability ultimately warranting the involvement of the International Monetary Fund and foundational capital restructuring to sustain the operation of the country. One of the positives of this unfortunate turn of events was a shift in European Central Bank governance principles. The ECB continuously introduced bailout fail-safes which further strengthened the Eurozone members. Furthermore, it reassured investors their capital was reasonably safe and promoted further investments. Confidence in the stability and relative lower riskiness of bonds was gradually restored. Figure 1: Bond yields for EU states 1999 - 2021 Poland is one of the few relatively larger economies that still fails to adopt the Euro on account of its own currency’s flexibility. This means they consider their national currency, the Polish Złoty, to be a monetary tool open for use by their government. This can be used to curb inflation, adjust a budget deficit, or respond to a dire need. An overarching goal is to increase GDP, which is expected to be more easily achieved exactly by maintaining its national currency. In particular, Karnowski and Rzońca (2023) argue the adoption of the Euro may trigger a so-called boom-bust cycle, which is excessive borrowing due to lower interest rates. They further state that keeping the Polish Zloty maintains more robust control over economic policy alignment with more developed EU states instead of the pressure and strain that adoption would imply. Sweden also applies similar principles and considers data points suggesting a potential negative GDP per capita impact of 6.5% had it joined the Eurozone in the period 1999 to 2013. Furthermore, projections showed there would be limited economic benefits from joining the Eurozone, as Sweden already has well-established economic ties and trade. Similar principles apply to Denmark, which has negotiated an opt-out, meaning it is not legally obliged to join the Eurozone. Figure 2: Central Bank Interest Rates PL, BG, RO, EU, SE On the other hand, Hungary and the Czech Republic, while maintaining their position as key transit countries between EU states for trade and economic activities, still maintain a strong hold on their national currencies. Overall, the adoption of the Euro for these countries would have a comparatively greater positive effect than that of Sweden and Denmark. While whether they will join the Eurozone is not a question as it is a key step in EU integration, political willingness is necessary in the long term. The Euro is projected to have marginal effects on more developed countries and moderate to high effects on relatively less developed countries of Central Europe. Figure 3: Eurostat GDP per capita for EU states On the other hand, Bulgaria and Romania, as countries on the lower side of EU GDP rankings, are seeking to strengthen their position as well. This means they politically and operationally remain on track to join the Eurozone soon. While Bulgaria has already entered into the further stage of adoption, ERM II of the adoption process, Romania remains behind. It is predicted there will be an increase of 15% of GDP over a 20-year horizon​ once Bulgaria adopts the Euro. Reasons behind this include the increased influx of Foreign Direct Investment (FDI) and the reduced cost of capital that is likely to result from it (Ganev, 2009). For Romania, which has one of the largest seaports – Constanta – enabling large volumes of trade to the rest of Europe, will most certainly benefit from the decrease in the costs of currency conversions (deadweight loss) and a more direct effect on streamlining the further increase in transit and trade volume. Some of the added benefits that have the potential to accelerate Romania’s industrial development are the cheaper credit sources compared to those currently available in Romanian Leu and national commercial banking institutions. Romania has set 2024 as its goal to join the Eurozone; however, it seems this will be delayed as it has yet to progress to the second stage of Euro adoption, which involves foundational monetary changes. Moreover, it is recommended Romania strengthen its approach to economic reforms and a stronger judiciary to enforce those reforms (Spendzharova, 2003). Despite obstacles on their way, Romania and Bulgaria are well underway to join the Eurozone and this will ultimately have an expansionary effect on their economies. While the Eurozone is conceptually and legally set to expand in the future, the economic effects of that process are uncertain. More developed EU Member States, such as Sweden and Denmark, do not seem to have much of a tangible need for such a step. On the other hand, developing countries such as Romania and Bulgaria and some moderately-developed countries such as Hungary, the Czech Republic, and Poland all have a foundational macroeconomic argumentation to continue with the process. This is particularly pronounced for the Balkan region, where GDP is generally the lowest in the EU. Losing sovereign monetary policy mechanisms makes more sense for those countries, namely Bulgaria and Romania, as the benefits seem to outweigh the drawbacks. However, it seems pertinent for the European Central Bank to impose stricter control mechanisms to ensure that crises such as that of Greece in 2010 can be assuredly avoided. With careful planning and governance systems, the ECB can ensure the Euro continues to grow and dominate the world as one of the most reliable and stable currencies. Further reading: Campos, N. F., F., Coricelli, F., Moretti, L., & Swedish Institute for European Policy Studies. (2016). Sweden and the Euro: The neglected role of EU membership. European Policy Analysis, https://www.sieps.se/publikationer/2016/sweden-and-the-euro-the-neglected-role-of-eu-membership-201615epa/sieps_2016_15epa.pdf European Commission, Joint Research Centre, Erhart, S. (2021). The impact of euro adaption on sovereign credit ratings and long-term rates, Publications Office. https://data.europa.eu/doi/10.2760/59588

It is hard to understate the overwhelming growth of globalisation over the past 50 years. Owning appliances labelled with "Made in China," t-shirts tagged with "Made in Bangladesh," shoes stamped with "Made in Vietnam," and eating pears freshly packed from halfway across the world has become just another part of our mundane, ordinary consumption habits. The world's shipping facilities and connections functioned seemingly well until the COVID-19 pandemic. Since then, news of shipping delays, increased costs, and bottlenecks seem unending. First lockdowns, then travel restrictions, then a ship stuck on the Suez Canal, then Russia's invasion of Ukraine, then low water levels in the Panama Canal, and, most recently, attacks on ships in the Gulf of Aden; the shipping industry has been through rough seas. Simultaneously, policymakers and managers signal a pivot towards more resilient, albeit costlier, supply chains. With the foundations of the shipping industry shaken to their core, the future is uncertain. How will shipping adapt to the coming decade? Is the era of cheap products from overseas over? How Did We Get Here? Maritime travel is (and historically always was) the cheapest and often quickest form of transport. However, today's level of international connectedness has never been the norm: worldwide shipping is a truly modern phenomenon. Geopolitical, economic, and technological conditions of the late 20th century made ideal conditions for the exponential growth of trade. This can be best understood through an application of the traditional Ricardian model, showing ocean trade's role in facilitating economies' gains from trading . According to David Ricardo's theory, countries specialise in sectors where they hold a comparative advantage (lower relative opportunity costs of production). The mid-20th century saw immense technological advancements facilitating oceanic trade. The development of a standard, easy-to-use container type for the whole world, along with advancements in GPS tracking, communications, shipbuilding, and, most recently, automation, have streamlined and cheapened oceanic transport. That is, the technology and standardisation of shipping have created an industry with massive economies of scale and, thus, very low unit costs. A pair of shoes, for instance, can be shipped from Shanghai to Los Angeles for less than USD 0.40. For a product that may retail at USD 40, maritime transport becomes essentially a non-cost. These low average costs have allowed countries to leverage the sectors where they hold a comparative advantage and supersize their trade output. The shipping industry also rode the wave of international geopolitical stability to expand its web of shipping lanes. Since World War II, the United States has been willing to protect the trade of allied (or at least subservient) nations in exchange for the continued supremacy of the USA and the Dollar. With its powerful navy, capable of projecting power worldwide, the USA provided growing export economies with the security they needed to invest heavily in their productive capacities,and, hence, expand their comparative advantage). The late 20th century witnessed a desire of Western corporations to outsource manufacturing to cheaper locations. This rise in demand for cheaper manufacturing was met with increasing supply of cheaper industrial output in other regions of the globe. Several Asian economies, exemplified by China, propelled their growth by propitiating the latter. The simultaneous rise in supply and demand for trade placed the shipping industry in the perfect position to maximise countries' gains from their comparative advantage. This arrangement benefited all parties: Western populations now had access to more and cheaper consumer goods, Asian countries saw unprecedented growth, and shipping companies saw a steadily rising bottom line. The oceanic shipping industry generates value by minimising the 'transaction costs' of trading. Whereas in the past, foreign-made garments and objects were signs of wealth, they are now commoditized necessities of the public. Through a never-ending quest for economies of scale, the shipping industry has facilitated the optimization of the terms of trade throughout the world. However, the thin margins and predictability on which oceanic trade rests have been continuously challenged in this new decade. Rough Seas Since Corona The 2020s have supplied a constant flow of instability and crises in all shapes and sizes. Starting with COVID-19, followed by the war in Ukraine, a growing not-China sentiment, Houthi attacks in the Red Sea, and strained geographical bottlenecks, the shipping industry has been in the news more than normal (and more than it would like). The shipping market is derived from the structure and demands placed by global supply chains. As the latter starts to change, the former will need to adapt. The COVID-19 pandemic brought the combined issues of increased demand and shut-off supply chains to rock the container transport industry. People, forced to stay at home, ordered more consumer goods than ever before (especially since 2021). Coupled with expansionary monetary policy and ample fiscal stimuli, demand for shipping was at an all-time high. Widespread travel restrictions and China's prolonged and recurring lockdowns increased producers' and oceanic transporters' unit costs. The Russian invasion of Ukraine disrupted food and energy supply chains, thus also disrupting shipping flows between producers and consumers of food and energy. Most notably, European countries' (over)reliance on Russian energy was exposed. More broadly, developed economies quickly realised the danger of relying on single suppliers, especially those from erratic autocracies with large geopolitical ambitions. The shocks to food and energy flows exacerbated capacity limitations and greatly increased shipping costs. As such, 2022 was, for most, a year of soaring inflation and unreliable foreign shipments. Late 2023 saw another conflict-related shipping disruption: Houthi attacks on ships traversing the Bab-el Mandeb on their way to the Suez Canal. The attacks skyrocketed prices of maritime insurance and shipping rates between Asia and the oil-rich Persian Gulf to Europe and North America. Consequently, many ships have since taken to the much longer route around Africa, avoiding missile strikes but returning to nearly forgotten 19th-century trade routes. The 2020s have also seen additional strain on other geographical shipping bottlenecks. The Panama Canal, which had been functioning at full capacity for many years, faced near-existential threats from decreasing rainfall reducing the supply of water for its locks. Since January, the canal has allowed only 24 ships to traverse it daily, down from 36 ships months earlier. The restriction has led to delays and increased shipping costs. Looking Ahead The shipping industry is not "creative"; its value comes from fulfilling the need for connection between productive and consuming locations. The oceanic shipping market is derived from the structure of the world's supply chains. As such, whatever the future holds for the world's shipping enterprises is inextricably linked to that of supply chains. Shipping companies respond to the direction of the world economy, not so much the other way around. The recent supply shocks and subsequent inflation have led companies and governments in consumer-driven developed economies to seriously consider "de-globalizing" their supply chains: choosing robustness over cheapness. Throughout Western governments, industrial policies focused on reaching more self-reliance (at least in key strategic sectors) have been popular since 2022. However, the infrastructure investments and pivoting of subsidy & tariff policies will likely take many years to effect major changes. Companies have similarly expressed intentions of pivoting their supply chains toward greater reliability. However, any changes so far have been slow and superficial. Despite a growing "not-China" rhetoric and its decreasing wage advantage over Southeast Asian manufacturers, it remains the powerhouse of the world's supply chains (and its robust shipping infrastructure only cements its position). Additionally, the added reliability publicised by Western multinationals has materialised as increasing inventory and simply finding an additional supplier (sourcing the product from two rather than one company). This could mean weaker economies of scale for importers and shipping companies as container flows become more dispersed. More broadly, manufacturing supply chains are shifting around in Asia, not, as is often romanticised, returning to Europe and North America. For the shipping industry, this means its global importance should continue. Shipping may not grow at the rapid pace of the 2000s, but it's also not going anywhere. Nonetheless, changing production regions in Asia could mean a (somewhat) costly adaptation period in the medium term. The tension between cheap versus reliable supply chains needs to not be a threat to the shipping industry, as exemplified by the strategies of the two largest container shipping companies: the Mediterranean Shipping Company (MSC) and Maersk. MSC has sought to outgun competitors with their capacity, keeping unit costs low at the expense of service quality. Maersk offers more expensive but better service with added flexibility and data-driven insights. The interplay between the two (and other shipping giants) is complex, however, the two firms could be well-positioned to each meet the future needs of exporters and importers. The Russian invasion of Ukraine was extremely disruptive to supply chains and, thus, oceanic transport. However, the outcome of the war (assuming no major escalation) is unlikely to change shipping flows any more than it has. In spite of thoroughly havoced maritime trade, the most significant disruptions are in the past. Russian relations and economic ties with Western countries are already (essentially) ruined and should not return to pre-2022 levels. Furthermore, Ukraine's productive capacities are not only aimed at the war effort but also severely impaired from the conflict for many years to come. Just as the industry seemed to be getting back on its feet, Houthi strikes on the Red Sea severely destabilised Asia-Europe shipping. However, since November 2023, the USA and EU militaries have formed military coalitions aimed at restoring security for maritime commerce (USA and allies: Operation Prosperity Guardian, EU: Operation Aspides). It is unlikely Houthi strikes will survive continued foreign retaliation. Overall, market sentiment is that the worst of the crisis has passed, but it will take several months for a return to normalcy. Most likely, the current crisis will follow a trajectory similar to the Somali Pirate attacks of the 2010s, which were put down after international military action. The shipping industry is a slow-moving, asset-heavy, and thus conservative one. Currently, it plays a waiting game: looking for definitive long-term plans while also evading sequential short-term issues. Most likely, current short-term shocks will be resolved or worked around fully. Its long-term future will be determined by where production centres move to. This movement will not eliminate the need for oceanic trade, though its flows may change. Globalised trade is here to stay. Due to obvious geographic constraints, maritime trade will remain vulnerable to geopolitical instability, climate crises, and capacity constraints in the future. For the past 2-3 years, politicians and companies have expressed a desire for "robust," "resilient," "independent," and "efficient" supply chains, but when push comes to shove, cheap Shein clothes, year-round fresh peaches, product variety, and cheap EVs — everyone's bottom line — are winning out and here to stay.

Family environments in the first years of life are key to a child's development. Recent evidence in the field of behavioral economics suggests that the quality of the interactions between parents and children can be challenged by behavioral barriers that preclude a good bonding between the caregiver and the child, and ultimately affect child development. Which behavioral barriers may interfere in early environments? • Present bias or high discount rates. Parents may fail to internalize future benefits from their investment in parenting practices and make shortsighted investment decisions on their children. • Complexity of the parental role, lack of attention, and diversion of the cognitive resources necessary to carry out the parental tasks. For instance, the stress associated with financial problems and social isolation can reduce self-control and consume cognitive resources that prevent their allocation to good parenting. • Negative identities. When negative identities are prevalent, parents feel that they are not capable of positively influencing their children’s development and well-being. Parenting interventions, such as home visits, have been effective in improving parenting practices. These interventions, however, are too costly to be implemented at scale given that they need to be carried out by highly trained facilitators. The challenge is to design interventions that can be scaled up to broad fractions of the population. With a group of economists and psychologists, we designed Crianza Positiva, a low-cost intervention to support parents of children aged 0 to 2 in their parenting roles. The program leverages technology and consists of text and audio messages sent three times a week for six months. It is delivered after parents complete an 8-week parenting workshop. The messages aim to increase parental investment by activating several mechanisms.  First, they seek to highlight the benefits of good parenting practices, through reminders about the benefits of different parental behaviors. In this way, they attempt to mitigate present bias. On the other hand, messages seek to break down complex parenting tasks into simpler tasks with simple suggestions and concrete activities. Thus, they attempt to address inattention and cognitive fatigue. Third, the messages attempt to transform negative identities into positive ones, by stimulating self-care and the identification of existing parental resources. In Bloomfield et al. (2023) we evaluated the effects of the e-messaging program on parental investment through a randomized controlled trial. Participant families attended Uruguay’s ‘Children and Family Care Centers’ (CAIF) (publicly funded, privately managed early childhood centers). After attending the parenting workshop, families were randomly assigned into a treatment and control group. Families in both groups participated in the 8-week workshop, but only those in the treatment group received text and audio messages. Results were promising: we found incremental effects over the workshop on the quantity of parental investment, as measured by the frequency of parental involvement with the child, and the quality of parental investment, given by measures of parental outreach for social support and parental reflective capacity. Our work contributes to a growing literature exploiting the combination of e-messages and nudges to boost early childhood development at scale. Our results suggest the large potential of these very low-cost interventions, based on mobile technology and the understanding of behavioral biases, to enhance parental behaviors, competences and attitudes.