Monetary Policy, Country Size and Labour Market Flexibility in the European Monetary Union

2009 ◽  
Author(s):  
Holger Zemanek
Keyword(s):  
Monetary Policy ◽  
Labour Market ◽  
Monetary Union ◽  
European Monetary Union ◽  
European Monetary ◽  
Country Size ◽  
Labour Market Flexibility

Is the Euro Working? The Euro and European Labour Markets

2004 ◽  
Vol 24 (2) ◽  
pp. 147-168 ◽  
Author(s):  
STEPHEN J. SILVIA
Keyword(s):  
Monetary Policy ◽  
Monetary Union ◽  
Euro Area ◽  
European Monetary Union ◽  
Structural Adjustment ◽  
Labour Markets ◽  
Fiscal Consolidation ◽  
European Monetary ◽  
Currency Area ◽  
Made In

Now that time has passed since the introduction of the euro as a commercial currency, it is possible to assess many arguments made in the abstract during the 1990s about European monetary union. This article shows that the euro zone still falls short as an optimal currency area in most respects. In particular, it undertakes an empirical analysis of the labour market and finds no progress toward flexibility or integration. These results challenge assertions of ‘endogenous currency area’ proponents that the euro area would become optimal ‘after the fact’, and that labour markets would serve as the principal avenue of adjustment. Instead, a ‘rigidity trap’ has developed in the euro area, consisting of relatively tight monetary policy, forced fiscal consolidation, and a risk of deflation in some economies. These conditions have compounded the difficulties of structural adjustment in European labour markets.

scholarly journals Pitfalls of DSGE Model Approach in Monetary Union

2019 ◽  
Vol 10 (4) ◽  
pp. 369-382
Author(s):  
Zlatica Konôpková
Keyword(s):  
Monetary Union ◽  
European Monetary Union ◽  
Model Estimation ◽  
Dsge Model ◽  
European Monetary ◽  
Country Size ◽  
Policy Simulations ◽  
The Stability ◽  
The Impact ◽  
Model Approach

Abstract This paper investigates the impact of country size on the DSEG model estimation of the monetary union. Following DSGE model for fiscal policy simulations (FiMod) the union is considered to have a two-country structure, the investigated country has weight in union equal to its population share and the second country represents the rest of members. The model is estimated for different country sizes and it is found there are two areas of equilibrium instability which covers 11 of 19 European Monetary Union members. The result is in contrary with Stähler and Thomas (2012) who estimated FiMod for Spain and stated that model can be recalibrated to every member of the monetary union. According to the result the size of country matters and affects the stability of equilibrium. Therefore, special attention is paid to small economies in monetary union. The results and consequences are then discussed with examples from recent history.

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