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The ECB's Dilemma in View of the European Monetary Union: The Case of Germany and Spain

Allinger, Katharina LU (2014) In EKHM52 Master Thesis 2nd Year EKHM52 20141
Department of Economic History
Abstract
In the post-crisis environment the discussion about the optimal monetary policy in the Euro Area (EA) is an important topic. A number of scholars have argued that a big part of the problem of the EA is the currency union, because Europe is too heterogeneous for a currency area. This paper asks what impact the existence of the currency union has had on the effectiveness of monetary policy in the EA by comparing the cases of Germany and Spain. It puts a particular emphasis on the trade-offs the ECB faces in the current situation when choosing its monetary policy by discussing the different needs of Germany and Spain. The theoretical review and empirical analysis in this thesis confirm that the existence of the monetary union has contributed... (More)
In the post-crisis environment the discussion about the optimal monetary policy in the Euro Area (EA) is an important topic. A number of scholars have argued that a big part of the problem of the EA is the currency union, because Europe is too heterogeneous for a currency area. This paper asks what impact the existence of the currency union has had on the effectiveness of monetary policy in the EA by comparing the cases of Germany and Spain. It puts a particular emphasis on the trade-offs the ECB faces in the current situation when choosing its monetary policy by discussing the different needs of Germany and Spain. The theoretical review and empirical analysis in this thesis confirm that the existence of the monetary union has contributed to substantial imbalances within Europe due to the fact that there is no one-size fits all monetary policy. Moreover, the existence of the monetary union has important effects on the policy choice of the ECB in the post-crisis situation. The empirical analysis shows that monetary policy has become a dangerous balancing act between preventing unsustainable expansions in some countries and dragging down growth in others. (Less)
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author
Allinger, Katharina LU
supervisor
organization
course
EKHM52 20141
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Monetary Policy, Euro Area, Financial Stability
publication/series
EKHM52 Master Thesis 2nd Year
language
English
id
4611314
date added to LUP
2014-08-29 14:31:45
date last changed
2014-09-10 12:14:40
@misc{4611314,
  abstract     = {{In the post-crisis environment the discussion about the optimal monetary policy in the Euro Area (EA) is an important topic. A number of scholars have argued that a big part of the problem of the EA is the currency union, because Europe is too heterogeneous for a currency area. This paper asks what impact the existence of the currency union has had on the effectiveness of monetary policy in the EA by comparing the cases of Germany and Spain. It puts a particular emphasis on the trade-offs the ECB faces in the current situation when choosing its monetary policy by discussing the different needs of Germany and Spain. The theoretical review and empirical analysis in this thesis confirm that the existence of the monetary union has contributed to substantial imbalances within Europe due to the fact that there is no one-size fits all monetary policy. Moreover, the existence of the monetary union has important effects on the policy choice of the ECB in the post-crisis situation. The empirical analysis shows that monetary policy has become a dangerous balancing act between preventing unsustainable expansions in some countries and dragging down growth in others.}},
  author       = {{Allinger, Katharina}},
  language     = {{eng}},
  note         = {{Student Paper}},
  series       = {{EKHM52 Master Thesis 2nd Year}},
  title        = {{The ECB's Dilemma in View of the European Monetary Union: The Case of Germany and Spain}},
  year         = {{2014}},
}