ECO 120 Study Guide - Final Guide: European Central Bank, Nominal Interest Rate, Fiscal Union
Document Summary
Eu to present: the european union from maastricht to the 2011 crisis. Requirements: each country"s inflation must at max be 1. 5% of 3 best performing members, each countries" nominal interest rate on government bonds must at max be. 2% > 3 best performing members: annual budget deficit no greater than 3% of gdp, debt/gdp < 60% The eu: 1997: 11 members meet criteria, belgium and italy do not and join anyway (violate debt/gdp ratio), 2001 greece allowed, result of criteria: all countries follow stricter policy and interest rates fall. Policy implications of the euro: no national banks controlling each country"s economy, european central bank- one size fits all , us has fiscal union funds flow from more prosperous to less prosperous states. Britain: entered to eec, difficult to shift from empire to european markets, now more competition, oil price shocks x2, inflation and recessions = stagflation, bitter labor relations- strikes rise sharply in 1970"s, peak 1979.
