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Failing Institutions Are at the Core of the Euro Crisis

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Author Info

  • Yochanan Shachmurove

    ()
    (Department of Economics and Business, The City College of The City University of New York,and Department of Economics, The University of Pennsylvania)

  • Alojzy Z. Nowak

    ()
    (University of Warsaw, Poland)

Abstract

The European Union was created to promote economic, cultural, and regional prosperity. However, the Global Financial Crisis demonstrates that its economic institutions are flawed. While each sovereign state in the Eurozone forfeits the control of its money supply, the lack of a common fiscal institution allows individual countries to pursue their own political and financial agendas. The on-going economic hardship emphasizes the critical role of economic and political institution ions. This paper analyzes both beneficial and perverse incentives of joining the European Union, discusses the consequences of deficient economic institutions and provides potential solutions towards the alleviation of the crisis.

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Bibliographic Info

Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 12-041.

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Length: 36 pages
Date of creation: 18 Oct 2012
Date of revision:
Handle: RePEc:pen:papers:12-041

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Keywords: European Union; Eurozone; Harmonized Index of Consumer Prices; Portugal; Ireland; Greece and Spain (PIGS); Fiscal Union; Financial Crises; Maastricht Criteria; Maastricht Treaty; Exchange Rate; Euro;

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  1. Paul de Grauwe & Francesco Paolo Mongelli, 2005. "Endogeneities of Optimum Currency Areas: What brings Countries Sharing a Single Currency Closer together?," Working Papers de Economia (Economics Working Papers) 29, Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro.
  2. Dellas, Harris & Tavlas, George S., 2009. "An optimum-currency-area odyssey," Journal of International Money and Finance, Elsevier, vol. 28(7), pages 1117-1137, November.
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