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Despite Crises, the Stability of the Euro Is Rooted in the Middle Class

Author

Listed:
  • Christian Bayer
  • Alexander Kriwoluzky
  • Gernot Müller
  • Fabian Seyrich

Abstract

In the 24 years since its introduction, the euro has experienced a financial crisis, a government debt crisis, a global pandemic, and an energy crisis—and survived. Using a model focusing on households, this Weekly Report shows that the monetary union’s stability is rooted in the fact that the middle class neither gains nor loses significantly relative to an independent currency following business cycle impulses. The shifting of the costs due to a crisis as a result of membership in a monetary union occurs at the tails of the wealth distribution, namely between groups of equal wealth in different countries.

Suggested Citation

  • Christian Bayer & Alexander Kriwoluzky & Gernot Müller & Fabian Seyrich, 2023. "Despite Crises, the Stability of the Euro Is Rooted in the Middle Class," DIW Weekly Report, DIW Berlin, German Institute for Economic Research, vol. 13(29/30/31), pages 217-222.
    • Handle: RePEc:diw:diwdwr:dwr13-29-1
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    More about this item

    Keywords

    HANK2; OCA theory; Two-country model; monetary union; spillovers; monetary policy; household heterogeneity; inequality; households;
    All these keywords.

    JEL classification:

    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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