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International eco: International financial institutions, Bretton woods…

- - - - interest rate: less than 2 percentage points higher than long–term interest rate in average of three low–inflation countries
      - EMS membership:
        no devaluation in the two years before entry into EMU
      - inflation: less than 1.5 percentage points higher than averageof three lowest inflation rates among EU member states
      - budget deficit (new debts): less than 3% of GDP
      - public debt (accumulated debts): less than 60% of GDP
- - - - positive demand shock to the Netherlands, negative demand shock to France;
      - positive demand shock to the Netherlands, negative demand shock to France;
    - - However: goods prices depend on wages wF, wNL;
      - problem: wNL and wF inflexible in NL and F!
      - Q has to change via changes in goods prices pF and pNL!