EMU enlargement and convergence of price levels: Lessons from the German reunification

We analyse the possible impact of EMU enlargement on inflation rates in the accession countries. Using a simple theoretical model we show that the optimal path price adjustments should be asymmetric, i.e. occuring mostly in the candidate countries. Using data from the German reunification we examine how price level convergence could come about. These findings are applied to the enlargement EMU: our findings indicate that (trend) inflation rates in the EMU candidate countries are likely to increase sharply, whereas the impact on the current euro area likely to be small, albeit not negligible. Our results support the need to allow some flexibility in the exchange rate arrangements with the candidate countries facilitate gradual price level convergence prior to EMU enlargement.EMU enlargement, accession countries, inflation, ECB, euro area, Germany, reunification

Large Differences in Publicly Visible Health Behaviours across Two Neighbourhoods of the Same City

Background: There are socioeconomic disparities in the likelihood of adopting unhealthy behaviours, and success at giving them up. This may be in part because people living in deprived areas are exposed to greater rates of unhealthy behaviour amongst those living around them. Conventional self-report surveys do not capture these differences in exposure, and more ethological methods are required in order to do so. Methodology/Principal Findings: We performed 12 hours of direct behavioural observation in the streets of two neighbourhoods of the same city which were similar in most regards, except that one was much more socioeconomically deprived than the other. There were large differences in the publicly visible health behaviours observed. In the deprived neighbourhood, we observed 266 more adults smoking (rate ratio 3.44), 53 more adults drinking alcohol (rate ratio not calculable), and 38 fewer adults running (rate ratio 0.23), than in the affluent neighbourhood. We used data from the Health Survey for England to calculate the differences we ought to expect to have seen given the individual-level socioeconomic characteristics of the residents. The observed disparities between the two neighbourhoods were considerably greater than this null model predicted. There were also different patterns of smoking in proximity to children in the two neighbourhoods. Conclusions/Significance: The differences in observed smoking, drinking alcohol, and physical activity between these tw

Does globalisation discipline monetary policymakers?

This paper analyses globalisation using a small general equilibrium model. It concludes that whether increased openness (a reduction in the costs of international trade) helps to discipline monetary policy in large open economies depends on the type of trade costs. Moreover, to the extent that globalisation induces stronger competition in the goods market, this may also have an adverse effect on monetary policy discipline. The latter is due to international expenditure switching, which becomes a more forceful channel as competition intensifies. Thus, the answer to the question in the title is not necessarily affirmative.Trade costs Competition Openness Monetary policy

The Timing of EU Expansion and the Real Exchange Rate

This paper employs a dynamic Ricardian model to analyse the impact of the timing of EU expansion on the real exchange rate between the accession countries' currencies and the euro. I find that the real exchange rate response to EU accession is smaller in the case of a postponed accession, as postponement gives the regions more time to converge. However, early EU accession would contribute to reducing the real exchange rate response to asymmetric productivity shocks, as increased bilateral trade reduces the size of the non-tradable goods sector, making the real exchange rate less sensitive to productivity shocks.

The Impact of the Single Market on the Effectiveness of ECB Monetary Policy

This paper studies the implications of Europe's single market. Small costs of international trade in goods and services may cause a large home bias in consumer spending and can explain seemingly excessive short-run exchange rate volatility. The European single market (declining costs of international trade between the euro area and the member states which have not adopted the single currency) will reduce the home bias in consumption. As a result, euro area monetary policy becomes less powerful in terms of stabilising consumption, but better able to in°uence the general price level.trade costs, home bias, monetary transmission, exchange rate volatility

Has the tradeoff between productivity gains and job growth disappeared?

Policymakers' efforts to boost trend output growth may be hampered by the presence of a tradeoff between productivity gains and job creation. This paper presents empirical evidence that the negative relationship between productivity growth and employment growth that prevailed in the 1960s and 1970s has disappeared since then. This finding is robust to using alternative measures and including other explanatory variables. The improved tradeoff may be good news for policymakers who aim at raising the 'speed limit' of the economy.productivity; employment; cross-country analysis

Globalisation and Monetary Policy

This paper studies the implications of globalisation for the effectiveness of monetary policy in large open economies, such as the euro area and the United States. The analysis allows for imperfect competition and an endogenous home bias in consumption. I find that globalisation (a reduction in the costs of international trade) causes a monetary expansion to have a larger (smaller) e�ect on prices (output). To the extent that globalisation also induces stronger competition in the goods market, I find that its impact on the incentive for activist monetary policy is ambiguous. Finally, globalisation reduces the beggary-thy-neighbour effects of monetary policy.trade costs; openness; monetary policy.