The Causes of Euro Instability

Philip Arestis, Iris Biefang- Frisancho Mariscal, Andrew Brown and Malcolm Sawyer ()
Additional contact information
Iris Biefang- Frisancho Mariscal: South Bank University London
Andrew Brown: University of East London
Authors registered in the RePEc Author Service: Iris Biefang-Frisancho

Macroeconomics from University Library of Munich, Germany

Abstract: This paper examines the causes of the general decline in the value of the euro by assessing the various explanations proffered in existing literature, then offering a more satisfactory explanation. The argument prevalent in the literatureCthat the decline in value of the euro is due to AU.S. strength@ rather than to any inherent difficulties with its impositionCis viewed as somewhat undeveloped. We suggest that U.S. strength is an important but only partial factor in euro decline; the other side of U.S. strength is eurozone weakness. We review the (poor) performance of the ECB and assess the level of macroeconomic convergence of eurozone countries. We conclude that a combination of eurozone weakness, endogenous to the inception of the euro, and U.S. strength is the most plausible explanation for the euro=s decline in value. We find that although the future value of the euro is uncertain, the prospects for the eurozone will remain bleak as long as the current institutions underpinning the euro, with their inherent tendencies to promote deflation, are in place.

JEL-codes: E (search for similar items in EconPapers)
Pages: 37 pages
Date: 2001-03-21
New Economics Papers: this item is included in nep-mon
Note: Type of Document - Adobe Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 37; figures: included
References: Add references at CitEc
Citations: View citations in EconPapers (7)

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Related works:
Working Paper: The Causes of Euro Instability (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpma:0103005

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