Central Bank Reaction to Public Deficit and Sound Public Finance: The Case of the European Monetary Union

Canale, Rosaria Rita

doi:10.2139/ssrn.1333504

Cited by 2 publications

(2 citation statements)

References 48 publications

(18 reference statements)

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“… Recessions make it difficult for devaluation and export to take place  Steps have to be taken to counter the inequalities that exist in the different states  Differences among the member states will create difficulties for national economies to come up with recovery plans  The interest rates will not be suitable for the whole region Further reasons against the ECB were highlighted to expose the structural defect within the euro system, namely that there is a monetary union that is in place and it does not work in line with a fiscal union. In the zone`s system, countries are required to follow a similar fiscal policy, but they do not have common treasury to enforce it (Canale, 2010). There is also the problem that the euro zone system has a difficult structure for quick response as it is a requirement to have unanimous agreement for decision-making from all member states.…”

Section: Arguments Against the Ecb Formationmentioning

confidence: 99%

“…Banks took up large quantities of bonds from weaker economies such as Greece which offered a small premium and the assumption was they were equally sound (IMF, 2010). With the development of the crisis it became apparent that Greece and possibly other countries' bonds offered substantially more risk (Canale, 2010). Contributing to this apparent lack of information about the risk of European debt was conflict of interest whereby the banks were earning a lot of money through underwriting bonds (Esrati, 2011).…”

Section: History Of the Euro Crisismentioning

confidence: 99%

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Fundamental Flaws in the Architecture of the European Central Bank: The Possible End of the Euro Zone and its Effects to East African Community (EAC) Countries

Moyo¹

2014

EJEF

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European countries embarked on a European integration programme that saw the formation of the Euro, which has emerged as a major currency (Blair, 1999) that was introduced in 1998. With the Euro, came the establishment of the European Central Bank. Thus this study seeks to investigate the flaws in the formation of the European Central Bank that surfaced during the major economic crisis in Europe. The crisis revealing the gaps in the formation and structure of the European central bank have created major challenges for the Economic and Monetary Union (EMU). Through an extant review of literature the study will examine the East African Community Countries, investigating the ties they have to the euro zone to analyse how the crisis has affected them. Furthermore, the study will analyse what would happen to the growth patterns of the East African Countries and the various prospects they may have should the Eurozone come to an end.

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Section: Arguments Against the Ecb Formationmentioning

confidence: 99%

Section: History Of the Euro Crisismentioning

confidence: 99%

Fundamental Flaws in the Architecture of the European Central Bank: The Possible End of the Euro Zone and its Effects to East African Community (EAC) Countries

Moyo¹

2014

EJEF

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The Recessive Attitude of EMU Policies: Reflections on the Italian Experience, 1998–2008

Canale

Napolitano

2009

SSRN Journal

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AbtractThe EMU assigns a very marginal role to economic policy and relies on the leading idea that, if prices are kept constant, there will be an automatic convergence towards long-run equilibrium income. These beliefs represent the theoretical underpinnings of fiscal and monetary policy strategies in Europe. In order to highlight the weakness of these foundations, the paper evaluates empirically the effects of public expenditure and interest rate setting on equilibrium income in Italy from 1998 to 2008. The analysis supports the conclusions that government spending has a positive impact on national income while inflation targeting has a negative impact. Moreover the empirical evidence shows that a high level of debt does not produce negative effects on GDP. Finally, at a time of financial crisis, these results appear to be reinforced for fiscal policy, but weakened for monetary policy. The paper draws the conclusion that the EMU's rigid rules for both fiscal and monetary policy have recessive attitudes, and limit the use of instruments to deal with high levels of unemployment, definitely undermining the future existence of the single-currency area.

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Central Bank Reaction to Public Deficit and Sound Public Finance: The Case of the European Monetary Union

Cited by 2 publications

References 48 publications

Fundamental Flaws in the Architecture of the European Central Bank: The Possible End of the Euro Zone and its Effects to East African Community (EAC) Countries

Fundamental Flaws in the Architecture of the European Central Bank: The Possible End of the Euro Zone and its Effects to East African Community (EAC) Countries

The Recessive Attitude of EMU Policies: Reflections on the Italian Experience, 1998–2008

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