Economic Resilience in EMU

This section discusses why convergence towards resilient economies is key for improving the functioning of the Economic and Monetary Union. Economic resilience refers to the ability of countries to withstand shocks and for GDP growth to recover quickly to potential levels. The experience of recent years has shown how the lack of resilience in one or several economies in the euro area can have significant and persistent effects not only on the countries concerned but also on other countries and the euro area as a whole, through multiple channels. This section focuses on which policies can contribute to resilience in the EMU. To do so, it develops the notion of economic resilience, provides a framework to identify key areas for resilience in a monetary union and a taxonomy of factors and policies that influence the resilience of Member States’ economies. The proposed framework is not a one-size-fits-all approach, but leaves room for country-specific policy settings and the sharing of best practices. There are notable differences in economic resilience among euro area countries and the broad taxonomy in this section could provide guidance for the prioritisation of reforms

Issues in Money Demand: The Case of Europe

This article establishes a co-integration analysis for the euro area (sample period: 1983-2000), identifying three co-integrating vectors: one which can be labelled money demand (in which real M3 money balances are related to output, with unit elasticity, and the long rate of interest); another pertaining to the spread between the short and long rate of interest; and a third which is an output (IS) relationship in which output is related to the real rate of interest. Currency substitution terms affect the adjustment of real money balances though they do not enter the co-integration space. We use the aggregation procedure for historical Euroland data advocated by Beyer, Doornik and Hendry for application to aggregation of money, GDP and prices when exchange rates were varying. We make use of the German short- and long-term interest rates as benchmarks for own rate and opportunity cost variables. Copyright Blackwell Publishing Ltd 2004.