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50 Years of EU Economic Dynamics pp 75–108Cite as

Instability of the Eurozone? On Monetary Policy, House Prices and Structural Reforms

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Abstract

This paper deals with potential instabilities in the Eurozone stemming from an insufficient interplay between monetary policy and reform effort on the one hand and the emergence of intra-Euro area divergences on the other hand. As a first step, we assess the effect of European Monetary Union (EMU) on structural reform and investigate this question by an examination of the relationship between fixed exchange rates and reform in two wider samples of countries. We also stress that loose monetary conditions, which prevailed until some months ago, can also manifest themselves in asset price inflation, notably in the housing market. When these bubbles burst (e.g., when housing prices stop rising) this often leads to a prolonged period of economic instability and weakness rather than consumer price inflation.

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Author information

Authors and Affiliations

  1. University of Hohenheim, Hohenheim, Germany

    Ansgar Belke

  2. Center for European Policy Studies, Brussels, Belgium

    Daniel Gros

Authors
  1. Ansgar Belke
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  2. Daniel Gros
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Editors and Affiliations

  1. Institut für Wirtschafts- und Sozialgeschichte, University of Münster, Domplatz 20-22, 48143, Münster, Germany

    Richard Tilly

  2. Lehrstuhl für Makroökonomische Theorie und Polititk, EIIW at the University of Wuppertal, Gaußstraße 20, 42119, Wuppertal, Germany

    Paul J. J. Welfens

  3. Allianz Group, Gallusanlage 8, 60301, Frankfurt, Germany

    Michael Heise

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Belke, A., Gros, D. (2007). Instability of the Eurozone? On Monetary Policy, House Prices and Structural Reforms. In: Tilly, R., Welfens, P., Heise, M. (eds) 50 Years of EU Economic Dynamics. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-74055-1_6

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