Can We Prevent Boom-Bust Cycles During Euro Area Accession?
Pascal Jacquinot and
Marcin Kolasa ()
Open Economies Review, 2014, vol. 25, issue 1, 35-69
Euro-area accession caused boom-bust cycles in several catching-up economies. Declining interest rates and easier financing conditions fuelled spending and borrowing from abroad. Over time inflation deteriorated external competitiveness, turning the boom into a bust. We ask whether such a scenario can be avoided using macroeconomic tools that are available in the period of joining a monetary union: central parity revaluation, fiscal tightening or increased taxation. We find that exchange rate revaluation is the most attractive option. It simultaneously trims the expansion of output and domestic demand, reduces the cost pressure and ranks first in terms of welfare. Copyright Springer Science+Business Media New York 2014
Keywords: Boom-bust cycles; Euro area accession; Dynamic general equilibrium models; E52; E58; E63 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
Working Paper: Can we prevent boom-bust cycles during euro area accession? (2011)
Working Paper: Can we prevent boom-bust cycles during euro area accession? (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:kap:openec:v:25:y:2014:i:1:p:35-69
Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/11079/PS2
Access Statistics for this article
Open Economies Review is currently edited by G.S. Tavlas
More articles in Open Economies Review from Springer
Bibliographic data for series maintained by Sonal Shukla ().