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Digital
Library of the European Council for Modelling
and Simulation |
Title: |
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Authors: |
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Published in: |
(2019). ECMS 2019
Proceedings Edited by: Mauro Iacono, Francesco Palmieri, Marco Gribaudo,
Massimo Ficco, European Council for Modeling and Simulation. DOI: http://doi.org/10.7148/2019 ISSN:
2522-2422 (ONLINE) ISSN:
2522-2414 (PRINT) ISSN:
2522-2430 (CD-ROM) 33rd International ECMS Conference on
Modelling and Simulation,
Caserta, Italy, June 11th – June 14th, 2019 |
Citation
format: |
Eszter Boros (2019). A Fair Solution Or
Pure Theory: Price Adjustment In The EMU, ECMS
2019 Proceedings Edited by: Mauro Iacono, Francesco Palmieri, Marco Gribaudo,
Massimo Ficco European Council for Modeling and Simulation. doi: 10.7148/2019-0057 |
DOI: |
https://doi.org/10.7148/2019-0057 |
Abstract: |
The expected
results of price adjustment have been lying at the core of recent internal
devaluation policies in Europe’s Economic and Monetary Union (EMU), and stretch
back to the questions of common monetary policy. Price changes have been
presented in the literature as an important channel of adjustment of
asymmetric developments, making common monetary policy more sustainable.
However, price flexibility and its effects cannot be taken for granted in
reality. Thus, this paper aims to empirically investigate the size of price
changes and their effects on intra-area trade in the EMU after 2010. Notably,
we examine two questions. The first is to what extent export prices and
domestic prices have adjusted in member states. The second question is
whether the observed price changes have sparked recovery via increased market
shares of exports and import substitution in the crisis countries. This is
investigated by applying decomposition equations to separate these “true”
trade outcomes as a starting point. According to our findings, mild effects
are partly in connection with the necessity of relying on slowly adjusting
prices in the common currency framework. It is therefore advisable to place
even greater emphasis on other risk mitigation mechanisms that underpin the
viability of the euro. |
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