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Europe’s Lack of Structural Transformation and Necessary Policy Changes of EMU

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  • Norén, Ronny

    ()
    (Mid Sweden University)

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    Abstract

    Primary goal of stabilization policy in the Treaty of European Union is price stability. That goal may be in conflict with the goal of full employment in the member states, particularly, then the union are hit by an asymmetric shock. Assuming perfect capital mobility a initial adverse shock (Krugman 1993) may have permanent effects by releasing a self-reinforcing process, which will result in lower relative growth. Given the specification of a model that captures the crucial element of efficient structural transformation it is easy to conclude the lack of necessary structural transformation within EMU. In addition, the basic foundation of economic policy by EMU, as manifested by the Treaty of European Union, is by latter research put into question. Therefore this paper suggest, it is necessary that the Treaty of European Union must be supplemented, changed, or both.

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    Bibliographic Info

    Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 598.

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    Length: 15 pages
    Date of creation: 04 Dec 2002
    Date of revision:
    Handle: RePEc:hhs:umnees:0598

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    Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
    Phone: 090 - 786 61 42
    Fax: 090 - 77 23 02
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    Web page: http://www.econ.umu.se/
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    Keywords: European Monetary Union; Structural flexibility; Optimal transformation; Phillips curve; Maastricht Treaty; Stability and Growth Pact.;

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    1. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 1-76.
    2. Noren, Ronny, 1998. "Industrial Transformation in the Open Economy: A Multisectoral View," Journal of Policy Modeling, Elsevier, vol. 20(1), pages 111-117, February.
    3. Lundborg, Per & Sacklén, Hans, 2001. "Is There a Long Run Unemployment-Inflation Trade-off in Sweden?," Working Paper Series 173, Trade Union Institute for Economic Research.
    4. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
    5. André Sapir & Marco Buti, 1998. "Economic policy in EMU," ULB Institutional Repository 2013/8078, ULB -- Universite Libre de Bruxelles.
    6. George A. Akerlof & William T. Dickens & George L. Perry, 2000. "Near-Rational Wage and Price Setting and the Long-Run Phillips Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 1-60.
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