Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/211842 
Year of Publication: 
1999
Series/Report no.: 
Bank of Finland Discussion Papers No. 11/1999
Publisher: 
Bank of Finland, Helsinki
Abstract: 
Evidence suggests that after a period of convergence in the early and mid 1990s, the euro area economies may have started diverging. As a consequence, the common monetary policy could become less well-suited for a number of countries.This paper studies the extent and severity of the recent divergences, and discusses the capacity of exposed countries to compensate for nationally suboptimal monetary conditions through other policy channels.As a step toward developing an analytical framework for monitoring intra-euro area developments, we present a "convergence barometer" to monitor divergences, and a Taylor rule based "monetary thermometer" to compare the common monetary policy to benchmark optimal policy for individual countries.A main conclusion is that policyrnakers at the euro area level should be concerned about divergences, since automatic stabilisers alone may not be enough to restore a healthy equilibrium to potential "outlier" countries.
Persistent Identifier of the first edition: 
ISBN: 
951-686-620-4
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.