The Euro and Global Turbulence: Member Countries Gain Stability

December 30th, 2013
in econ_news

by Gby Matthieu Bussière, Alexander Chudik and Arnaud Mehl - Federal Reserve Bank of Dallas

Discussions about Europe’s role in a rebalancing of the global economy—specifically whether countries under stress, such as Greece, Ireland, Portugal or Spain, will close their competitiveness gaps with Germany—are part of a wider, long-standing debate about whether the euro’s creation has changed the way countries sharing the single currency adjust to shocks.

mortgage-rates-2-year-high

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A key question since the euro’s launch in 1999 has been whether the costs associated with fixed exchange rates would exceed the potential integration benefits for members of the monetary union. In other words, now that differences in relative competitiveness across euro-area members can no longer be corrected by changes in exchange rates, how will real (inflation-adjusted) wages and other indicators of competitiveness adjust? This question is not specific to the euro; it is a classic dilemma in all monetary unions.

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source: http://dallasfed.org/assets/documents/research/eclett/2013/el1311.pdf









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