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Accession to the euro-area: a stylized analysis using a NK model

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  • Bas Aarle
  • Harry Garretsen
  • Cindy Moons

Abstract

This paper analyses the accession to the Euro-Area by new members using a stylized new-Keynesian model. We analyze macro-economic adjustment in the pre- and post accession case and calculate welfare in both situations to obtain net benefit/loss from accession. It is shown how the effects of accession is related to the conduct of monetary policy and fiscal policy in the pre- and post accession case. The simulation examples point at the potential costs that accession might entail due its consequences on monetary and fiscal policy design. These consequences from accession in terms of macro-economic stabilization ability of monetary and fiscal policies have not always been fully acknowledged and need attention in our opinion.
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  • Bas Aarle & Harry Garretsen & Cindy Moons, 2008. "Accession to the euro-area: a stylized analysis using a NK model," International Economics and Economic Policy, Springer, vol. 5(1), pages 5-24, July.
    • Handle: RePEc:kap:iecepo:v:5:y:2008:i:1:p:5-24
    DOI: 10.1007/s10368-008-0107-y
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    Cited by:

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    2. Marcelo Sánchez, 2012. "Structural Reform and Transparency in a Monetary Union," Open Economies Review, Springer, vol. 23(3), pages 559-577, July.
    3. Séverine Menguy, 2009. "Heterogeneity in Inflation Persistence and Monetary Policy in a Monetary Union," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 52(2), pages 121-141.
    4. Valentyna Ozimkovska, 2016. "Volatility of industrial production growth and characteristics of optimal currency areas in EU-12 countries," International Economics and Economic Policy, Springer, vol. 13(4), pages 563-591, October.

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    More about this item

    Keywords

    Euro-area; Fiscal policy; Monetary policy; F31; F41; G15;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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