EMU@10: Coping with Rotating Slumps
Oliver Landmann ()
Additional contact information
Oliver Landmann: Department of International Economic Policy, University of Freiburg
No 9, Discussion Paper Series from Department of International Economic Policy, University of Freiburg
Abstract:
On the eve of the financial and economic crisis of 2008/09, the European Economic and Monetary Union (EMU) could look back to a decade of remarkable macroeconomic stability. Somewhat surprisingly, though, inflation differentials across member states have been substantial and persistent, causing large cumulative changes in relative price levels. This paper presents a stylized theoretical model of a monetary union which demonstrates how persistent inflation differentials can arise from inflation inertia in conjunction with the loss of monetary control on the national level. The interaction of inflation and output dynamics which is at the core of the model generates a pattern of ‘rotating slumps’ (a term coined by Blanchard 2007b). A number of implications are derived from the model which shed light on the observed behavior of cyclical conditions and inflation rates in the euro area. The paper concludes that the monetary-fiscal framework of EMU does not pay adequate attention to the need of dealing with internal macroeconomic tensions within the euro zone.
Keywords: EMU (search for similar items in EconPapers)
Pages: 26 pages
Date: 2009-07, Revised 2009-07
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
https://www.iep.uni-freiburg.de/discussion-papers/ ... /files/dp9_emu10.pdf (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:fre:wpaper:9
Access Statistics for this paper
More papers in Discussion Paper Series from Department of International Economic Policy, University of Freiburg Contact information at EDIRC.
Bibliographic data for series maintained by Günther G. Schulze ().