Abstract
As previously outlined, a country within the eurozone faces a considerably different macroeconomic policy framework from that previously experienced by EU member states. Monetary policy is now set by the independent ECB, whilst national governments possess fiscal and supply-side policies. Hence, from an individual country’s viewpoint, interest rates are now ‘fixed’ and will only move if the ECB decides that economic conditions are changing for the eurozone as a whole and not if an individual country, or group of countries, suffers an economic shock (McKinnon, 2003; von Hagen, 2003; Wyplosz, 2003). Thus, the eurozone participating countries now have two choices. Firstly, provided that it does not infringe the convergence criteria/SGP, a country can use fiscal policy to counteract whatever shock has occurred (Gali and Perotti, 2003). Secondly, that country can wait for its labour market to alter wages and then prices and, thus, its overall degree of international competitiveness.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
Author information
Authors and Affiliations
Copyright information
© 2015 Mark Baimbridge and Philip B. Whyman
About this chapter
Cite this chapter
Baimbridge, M., Whyman, P.B. (2015). Economic Policymaking within the Eurozone. In: Crisis in the Eurozone. Palgrave Macmillan, London. https://doi.org/10.1057/9781137329035_8
Download citation
DOI: https://doi.org/10.1057/9781137329035_8
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-46049-6
Online ISBN: 978-1-137-32903-5
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)