The Resilience of the Euro
Journal of Economic Perspectives
vol. 35,
no. 2, Spring 2021
(pp. 3-22)
(Complimentary)
Abstract
Over 2014–2019, the euro area charted a substantial post-crisis economic recovery while also reducing macro-financial vulnerabilities. The array of post-crisis institutional reforms has improved the capacity of the euro area to withstand adverse shocks, even if the narrowing of imbalances also came at a high cost (especially in the most indebted member countries). The pandemic has provided a new test: the combination of a common central bank and the enlargement of the common fiscal capacity has provided substantial policy support and fostered a narrowing in risk premia, despite significant differences in levels of public debt and exposures to the pandemic shock. While the resilience of the euro is sure to be tested further in the coming years, the extent of the underlying political backing for the common currency should not be underestimated.Citation
Lane, Philip R. 2021. "The Resilience of the Euro." Journal of Economic Perspectives, 35 (2): 3-22. DOI: 10.1257/jep.35.2.3Additional Materials
JEL Classification
- E32 Business Fluctuations; Cycles
- E44 Financial Markets and the Macroeconomy
- E52 Monetary Policy
- E58 Central Banks and Their Policies
- F33 International Monetary Arrangements and Institutions
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