The European Central Bank and the Euro: The First Year

Martin Feldstein

No 7517, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The creation of the euro and the European Central Bank is a remarkable and unprecedented event in economic and political history: creating a supranational central bank and leaving eleven countries without national currencies of their own. The experience of the first year confirms that one size fits all' monetary policy is not suitable for Europe because cyclical and inflation conditions vary substantially among countries. Labor market policies during this first year will increase this problem in the future and may lead to more trade protectionism. The paper explores reasons why cyclical unemployment, structural unemployment, and inflation may all be higher in the future as a result of the single currency. Although some advocate the euro despite its economic problems because of its assumed favorable effects on European political cohesiveness, the paper argues that it is more likely to lead to political conflict within Europe and with the Unites States.

JEL-codes: F33 (search for similar items in EconPapers)
Date: 2000-02
New Economics Papers: this item is included in nep-eec, nep-his, nep-ifn and nep-mon
Note: IFM
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Citations: View citations in EconPapers (26)

Published as Feldstein, Martin, 2000. "The European Central Bank and the Euro: The First Year," Journal of Policy Modeling, Elsevier, vol. 22(3), pages 345-354, May.

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