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| Author: | Lenain, P. Serres, A. de |
| Title: | Is the Euro Area Converging or Diverging? Implications for Policy Co-ordination |
| Journal: | World Economy
2002 : NOV, VOL. 25:10, p. 1501-1520 |
| Index terms: | EURO POLICY ECONOMICS EUROPEAN MONETARY SYSTEM |
| Language: | eng |
| Abstract: | Despite the dire predictions that twelve independent nations would never be able to manage a single currency, the first three years of the euro area have proved to be relatively successful. The European Central Bank (ECB) has kept the area's economy away from the two risks of high inflation and stagnation. Although it has not been flawless, the changeover to euro cash has happened without major hurdles. The evidence presented in this paper suggests that channels of adjustment have not operated as expected during the first three years of EMU. High inflation has not yet reduced real growth in overheating countries, and low inflation has not yet boosted real growth in sluggish economies. Empirical evidence also suggests that fiscal policy has not been used to reduce cyclical differences. |
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