Resource title

The impact of monetary instruments on shock absorption in EU-Countries

Resource image

image for OpenScout resource :: The impact of monetary instruments on shock absorption in EU-Countries

Resource description

The main characteristic of the implementation of the European Monetary Union (EMU) is the transition from various national currencies to the Euro, the common European currency. A final fixing of the individual bilateral exchange rates of all European countries involved in the Monetary Union accompanies this step. Regarding the microeconomic effects, a positive impact on trade is expected by the reduction of transaction and foreign currency management costs as well as by the elimination of the exchange rate uncertainty. Formerly, the latter influenced foreign trade.1 At the same time, however, the autonomy of national economic policy is restricted by the loss of former national monetary policy instruments, which will now operate European-wide with the start of EMU. In addition to a unique interest rate policy inside EMU, there will be no longer an – even limited - flexibility of the nominal exchange rates. According to the theory of Optimal Currency Areas (OCA)2, in a flexible or at least not irrevocably fixed exchange rate system3 these are two potential instruments carrying some of the burden of macroeconomic adjustment. EMU supporters and sceptics give these aspects different values: while supporters hope to obtain growth and employment impulses through more monetary stability, sceptics are anxious, since in their opinion, the economic convergence4 of the European states is yet not optimal and, additionally, alternative instruments do not yet function efficiently.

Resource author

Claudia Müller, Herbert S. Buscher

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/24301

Resource license

Adapt according to the presented license agreement and reference the original author.