The European Central Bank and the Euro: The First Year

14 Pages Posted: 7 Apr 2000 Last revised: 15 Oct 2010

See all articles by Martin S. Feldstein

Martin S. Feldstein

National Bureau of Economic Research (NBER) (deceased); Harvard University (deceased)

Date Written: February 2000

Abstract

The creation of the euro and the European Central Bank is a remarkable and unprecedented event in economic and political history: creating a supranational central bank and leaving eleven countries without national currencies of their own. The experience of the first year confirms that one size fits all' monetary policy is not suitable for Europe because cyclical and inflation conditions vary substantially among countries. Labor market policies during this first year will increase this problem in the future and may lead to more trade protectionism. The paper explores reasons why cyclical unemployment, structural unemployment, and inflation may all be higher in the future as a result of the single currency. Although some advocate the euro despite its economic problems because of its assumed favorable effects on European political cohesiveness, the paper argues that it is more likely to lead to political conflict within Europe and with the Unites States.

Suggested Citation

Feldstein, Martin S., The European Central Bank and the Euro: The First Year (February 2000). NBER Working Paper No. w7517, Available at SSRN: https://ssrn.com/abstract=216489

Martin S. Feldstein (Contact Author)

National Bureau of Economic Research (NBER) (deceased)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-868-3905 (Phone)
617-868-7194 (Fax)

Harvard University (deceased)

Littauer Center
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-495-2167 (Phone)
617-496-5444 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
76
Abstract Views
2,137
rank
358,931
PlumX Metrics