 Reconsidering the economic and political reasons of the euro area crisis: Diverging fundamentals or self-fulfilling expectations?Pompeo Della Posta ()
PSL Quarterly Review, 2017, vol. 70, issue 282, 283-310 Abstract: This article nests the explanations of the euro crisis in terms of economic, political and institutional causes within the diverging fundamentals vs. self-fulfilling expectations debate. It argues that explanations based on fundamental divergences refer to a subset of economic variables only, while those based on self-fulfilling expectations refer to political and institutional variables. However, since there is no reason not to include the latter among the fundamental variables of an economy, there is no need to refer to negative self-fulfilling expectations as an explanation for the crisis. In the paper, the role played by political and institutional variables, namely federal and monetary solidarity, is formalized in a simple model of diverging fundamentals that goes beyond the consideration of economic variables only. Keywords: Euro crisis; Fundamentals; Self-fulfilling expectations; Fiscal solidarity; Monetary solidarity (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:psl:pslqrr:2017:33 Ordering information: This journal article can be ordered from Access Statistics for this article PSL Quarterly Review is currently edited by Alessandro Roncaglia and Carlo D'Ippoliti More articles in PSL Quarterly Review from Economia civile |
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