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transparent monetarypolicies tend to exhibit better financial stability. There have been numerous studies on financial policy reforms following the crises. Given the argument that financial liberalisation without prudential regulation often causes financial
the market economy.
The reasons for this disconnect are largely two: tax policy in recent decades and recent monetarypolicy. It would be impossible to discuss those policies in detail here. Therefore, we shall limit ourselves to some rather
2017 ). (German reservations were later rejected by the European Court of Justice which acknowledged that the OMT was needed to maintain an effective monetarypolicy transmission.) The OMT provides two key insights for our paper. First, it highlights
nominal exchange rates and more broadly, own monetarypolicy ( Mundell 1961; McKinnon 1963; Kenen 1969; De Grauwe 2012 ). To put it otherwise, currency unions create a trap or an impossible trinity. The trilemma states that out of exchange rate stability
domestic capital leaks out of the country, the bank credit channel of monetarypolicy is destabilized, making monetarypolicy object challenging to realize. Also, the continuous outflow depletes the foreign reserve so governments would have to spend