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The European Central Bank and the Euro: The First Year

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  • Feldstein, Martin

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.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 22 (2000)
Issue (Month): 3 (May)
Pages: 345-354

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Handle: RePEc:eee:jpolmo:v:22:y:2000:i:3:p:345-354

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Web page: http://www.elsevier.com/locate/inca/505735

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Cited by:
  1. Andrén, Niclas & Oxelheim, Lars, 2002. "Exchange-Rate and Interest-Rate Driven Competitive Advantages in the EMU," Working Paper Series 576, Research Institute of Industrial Economics.
  2. Philip Arestis & Iris Biefang-Frisancho Mariscal & Andrew Brown & Malcolm Sawyer, 2001. "The Causes of Euro Instability," Economics Working Paper Archive wp_324, Levy Economics Institute.
  3. Jérôme Creel & Jacky Fayolle, 2002. "La Banque centrale européenne ou le Seigneur des euros," Sciences Po publications info:hdl:2441/3004, Sciences Po.
  4. repec:spo:wpecon:info:hdl:2441/3004 is not listed on IDEAS
  5. repec:spo:wpecon:info:hdl:2441/2942 is not listed on IDEAS
  6. Jérôme Creel & Jacky Fayolle, 2002. "La Banque centrale et l'Union monétaire européennes : les tribulations de la crédibilité," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(5), pages 211-244.
  7. Alexandra Ferreira Lopes & Álvaro M. Pina, 2008. "Business Cycles, Core and Periphery in Monetary Unions: Comparing Europe and North America," Working Papers Department of Economics 2008/21, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  8. Johnson, David R., 2002. "The effect of inflation targeting on the behavior of expected inflation: evidence from an 11 country panel," Journal of Monetary Economics, Elsevier, vol. 49(8), pages 1521-1538, November.
  9. Philip Arestis & Andrew Brown & Kostas Mouratidis & Malcolm Sawyer, 2002. "The Euro: Reflections on the first three years," International Review of Applied Economics, Taylor & Francis Journals, vol. 16(1), pages 1-17.
  10. Karsten Staehr, 2008. "The Maastricht Inflation Criterion and the New EU Members from Central and Eastern Europe," Bank of Estonia Working Papers 2008-04, Bank of Estonia, revised 30 Oct 2008.
  11. Wan, Jer-Yuh & Kao, Chung-Wei, 2008. "The euro and pound volatility dynamics: An investigation from conditional jump process," Research in International Business and Finance, Elsevier, vol. 22(2), pages 193-207, June.
  12. Pompeo Della Posta, 2005. "Fundamentals, International Role of Euro and 'Framing' of Expectations: What are the Determinants of the Dollar/Euro Exchange Rate?," Working Papers de Economia (Economics Working Papers) 24, Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro.

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