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Chapter 10 (Greece has had the most violations (Greece did have the…
Chapter 10
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Inflation bias is the inability to resist the political pressure to use expansionary monetary policy for short-term gains.
From 1870 to 1914, the gold standard system of fixed exchange rates prevails.
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Fiscal federalism occurs when a currency union is built on top of a federal political structure with fiscal mechanisms that permit interstate transfers.
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The "doom loop": weak banks' losses can damage the sovereign's creditworthiness just when it may need funds to resolve a crisis; simultaneously, a weak sovereign's debt can decline in value, damaging the balance sheets of local banks where such local debt is predominantly held.
The European Union it is mainly economic union of countries that is in the process of extending across the geographical boundaries of Europe.
The ECB has no mandate to act as a lender of last resort by extending credit to financial institutions in the Eurozone in the event of a banking crisis.
As the degree of economic similarity increases, the number of shocks that are asymmetric should decrease.
From 1981 to 1986, the Second and Third enlargements of the European Communities occur to include Greece, Portugal, and Spain.
There are more than three rules. Three of the rules do require convergence in nominal measures closely related to inflation.
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In 2008, the Global Financial Crisis occurred.
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In 1997, the Treaty of Amsterdam addresses EU citizenship, rights, powers of European Parliament, employment, and common foreign and security policy.
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The European Union it is mainly economic union of countries that is in the process of extending across the geographical boundaries of Europe. It is composed of 28 countries.
In 1995, the Fourth enlargement occurs to include Austria, Finland, and Sweden.
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In 2001, the Treaty of Nice addresses EU expansion, amends and consolidates Rome and Maastricht treaties, and modifies voting procedures.
The optimum currency area theory states if either market integration or symmetry increases, the net benefits of a common currency will rise.
The OCA line is likely to be above the FIX line, because when countries consider forming a currency union, the economic tests (based on symmetry and integration) set a higher bar than they set for judging whether it is optimal to fix.
If there is a greater degree of economic integration between the home region (A) and the other parts of the common currency zone (B), the volume of transaction between the two will be larger.