Real Convergence in a Monetary Union

Horst Tomann
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Horst Tomann: Freie Universitaet (FU) Berlin

Chapter 10 in Monetary Integration in Europe, 2017, pp 183-196 from Palgrave Macmillan

Abstract: Abstract A lack of real convergence has been regarded as the original sin of the Economic and Monetary Union. The financial crisis even intensified economic divergence. Against this background, Chapter 10 describes macroeconomic imbalances, in particular external imbalances, and tries to clarify the long-term implications of a monetary union for competitiveness and growth. Contrary to conventional wisdom, this chapter argues that a monetary union may stimulate real convergence because it sets credible guidelines for labour contracts. Moreover, the author questions whether the observed divergence in macroeconomic indicators does reliably indicate macroeconomic imbalances. This is demonstrated in the case of diverging ‘real’ interest rates.

Date: 2017
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DOI: 10.1007/978-3-319-59247-3_10

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